Case Title: STATE EX REL VICTOR S INC v DIST

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1976-01-07T00:00:00Z

Document:
No. 13150 I N THE S U P R E M E C O U R T O F THE STATE O F MONTANA 1975 T H E STATE O F MONTANA, ON THE RELATION O F VICTOR'S,INC., A Montana Corporation, Relator and Applicant, THE DISTRICT COURT OF THE EIGHTH JUDICIAL DISTRICT O F THE STATE O F M O N T A N A , I N AND F O R THE COUNTY O F CASCADE; THE H O N O R A B L E B. W. T H O M A S , D i s t r i c t Judge, Being t h e Presiding Judge and the City of Great F a l l s , A Municipa 1 Corporation, Respondents. ORIGINAL PROCEEDING: Counsel of Record: For Relator : Smith, Emmons and B a i l l i e , Great F a l l s , Montana Robert J. Ernmons argued, Great F a l l s , Montana For Respondents : Alexander, Kuenning, Miller and Ugrin, Great F a l l s , Montana Paul D. M i l l e r argued, Great F a l l s , Montana Submitted: September 30, 1975 Decided: JAN 7 1376 ; G j l I Filed : I 5% This matter i s before the Court on an application by Victor's, mc., defendant i n the d i s t r i c t c o u r t , f o r a w r i t of supervisory ~ o n t r o l o r other appropriate w r i t , directed t o the J i s t r i c t court, Cascade County, and t o the presiding judge, dssuming and taking j u r i s d i c t i o n of a l l f u r t h e r proceedings i n jchat c e r t a i n cause i n said court, being Cause No. 78667-B, e n t i t l e d 'CITY O F GREAT FALLS, a municipal corporation, and GREAT FALLS LN'I'ERNATIONAL AIRPORT AUTHORITY, P l a i n t i f f s , vs. VICTOR'S, I N C . , a '\fontana corporation, Defendant". This Court was asked t o review t h e judgment entered therein on July 16, 1975, a s amended by order oi the d i s t r i c t court dated August 8, 1975, and t o reverse the j~dgment and render judgment f o r r e l a t o r and applicant herein, ~ ~ l c t o r ' s , Inc. Prior t o t h i s application Victor's, Inc. had f i l e d L L ~ n o t i c e of appeal from the f i n a l judgment of the d i s t r i c t court. i h i s Court deemed t h e appeal t o be inadequate, consolidated the dppeal [ t h i s Court's ?,,13149] with t h i s application [ t h i s Court's d13150], and assumed j u r i s d i c t i o n under supervisory control. 'She matter was briefed, heard i n o r a l argument and submitted. In 1947 the City of Great F a l l s , a municipal corporation, * 2 b i a i r i e J from the Montana Liquor Control Board a beer and a liquor L i ~ e n s e t o operate a liquor business t o be known a s t h e "Great v h l l s Municipal Airport ~ounge", located a t t h e Great F a l l s biu~iicipal Airport. This a i r p o r t i s outside the corporate l i m i t s ~f the City of Great F a l l s . Simultaneously the City, a s l e s s o r , and Donald F. Robinson, db '-essze, entered i n t o a lease agreement f o r r e s t a u r a n t , b a r , and ~ o c k t a i l lounge f a c i l i t i e s a t the Great F a l l s Airport. The l e a s e urovided i n part: "8. Party o f t h e f i r s t p a r t [City] i s t h e Dwner of beer and liquor permits numbered 1059 and 990 respectively. It i s covenanted and agreed t h a t s a i d permits w i l l be assigned t o and operated under the name of party of the second p a r t [Robinson] f o r t h e duration of t h i s l e a s e , t o be re-assigned t o party o f t h e f i r s t p a r t upon the termination of s a i d l e a s e f o r any cause whatsoever. 9 : 9:" The City was t o be paid a percentage, based on the gross r e c e i p t s of ~ o b i n s o n ' s operation. O n May 8, 1948, t h e City submitted a signed assignment of i n t e r e s t t o t h e Montana Liquor Control Board which provided: I I For a good and valuable consideration and subject t o t h e approval of t h e Montana Liquor Control Board, I hereby s e l l , assign, t r a n s f e r and s e t over unto Don F. Robinson * * a l l r i g h t , t i t l e and i n t e r e s t i n and t o [the beer and l i q u o r l i c e n s e (Emphasis supplied). The assignment was signed by the mayor of Great F a l l s . The City did not take any s e c u r i t y i n t e r e s t i n the licenses. I n November 1952, t h e City and Robinson executed a new l e a s e f o r the a i r p o r t lounge f a c i l i t i e s f o r a term of f i v e years. This lease contained a provision which was t o be used i n a l l leases between the City and various lessees of t h e a i r p o r t lounge u n t i l t h e present l e a s e with v i c t o r ' s , Inc. The provision changed from t h e o r i g i n a l l e a s e reads: "8. Party of t h e F i r s t Part [City] was o r i g i n a l l y t h e owner of the S t a t e of Montana r e t a i l beer and l i q u o r l i c e n s e s used i n t h e operation of s a i d b a r and c o c k t a i l lounge operated by p a r t y of t h e Second Part i n t h e above-described premises, and s a i d l i c e n s e s have been assigned t o and a r e now i n t h e name df party of t h e Second P a r t ; it i s covenanted and agreed t h a t s a i d permits and l i c e n s e s a r e t o be oper- ated under t h e name of party of t h e Second Part and t h a t party of t h e Second Part w i l l continue t o pay f o r a l l of s a i d l i c e n s e s and the renewals of a l l of s a i d l i c e n s e s , and s h a l l pay a l l f e e s , taxes and dharges assessed under Federal, S t a t e , o r Local s t a t u t e s and ordinances, i n s o f a r a s they a r e applicable, - and chat party of t h e Second P a r t w i l l assign t o party of the F i r s t Part upon the termination of t h i s l e a s e a l l ~f s a i d beer and liquor licenses." ( Emphasis supplied.) 'The colliperlsation paid by the l e s s e e was changed from a percentage of rhe grvss t o a s e t monthly r e n t a l figure. I'he I_lcerrses w e i e i r a n s L e ~ r e J a ~urrlber of Limes and eventuaLly transferred by t h e Horizon Club t o V i c t o r ' s , Inc. i n 1362 under a Horizon Club l e a s e which was t o expire i n 1964. In dach case the assignment accompanied a s a l e of the lounge and i l x t u r e s themselves together with a t r a n s f e r of t h e l i c e n s e s from dlle owner t o t h e other and mortgages placed upon t h e l i c e n s e s by velidee o r bank and f i l e d with t h e Montana Liquor Control. Board, ! : d secure payment under t h e transaction. In March 1966, v i c t o r ' s , Lric. executed i t s own l e a s e agreement with t h e City. The section prcviding f o r c o n t r o l of t h e licenses i s somewhat d i f f e r e n t than t h e p d s t leases i n t h a t it only provides t h a t l e s s e e assign h i s i n t e r e s t not t h e l i c e n s e s themselves i n t h i s language: I I Lessor was o r i g i n a l l y the owner of the S t a t e of Montana r e t a i l beer and liquor l i c e n s e s used i n t h e operation of s a i d b a r and c o c k t a i l lounge operated by Lessee i n the above-described premises, and s a i d licenses have been assigned t o and a r e now i n t h e liame of t h e Lessee; i t i s covenanted and agreed t h a t > a i d permits and l i c e n s e s a r e t o be operated under che name of Lessee and t h a t Lessee w i l l continue t o pay d l 1 of s a i d l i c e n s e s and renewals of a l l of s a i d l i c e n s e s , dnd s h a l l pay a l l f e e s , taxes and charges assessed under )Jederal, S t a t e , o r Local s t a t u t e s and ordinances, inso- f a r a s they a r e applicable. Lessee s h a l l , upon termin- a t i o n of t h i s Lease, assign t o Lessor a l l of h i s i n t e r e s t in and t o s a i d Beer and Liquor l i c e n s e ; PROVIDED, how- e v e r , t h a t i f Lessee assigns t h i s Lease o r sub-leases ;:he premises a s herein provided i n Paragraph 1 2 , Lessee nay s e l l and assign, s o l e l y with w r i t t e n consent of L e s s o r i s i n t e r e s t i n said Lease t o t h e Assignee o r Sub- Lessee. (Emphasis supplied). I I Lessee argues t h a t t h e word ease" i n t h e l a s t l i n e of t h e above quoted paragraph i s i n e r r o r and makes no sense a s used and should be "license". The City of Great F a l l s has constructed a new a i r p o r t cerrninal building and has contracted with an out of s t a t e firm designated Dyneteria, Inc., t o operate t h e food and lounge f a c i l i t y and has c o n t r a d t o furnish Dyneteria, Inc. t h e l i c e n s e s i n question here. The l e a s e with v i c t o r ' s , Inc. expired and t h e C i t y brought an a c t i o n a g a i n s t V i c t o r ' s , Inc. t o s p e c i f i c a l l y en- force t h e lease provision with respect t o assignment of t h e r e t a i l Liquor dnd 3eer L~ceases and t h d c VicLor s , inc. be ordered co dssign t o the City o r i t s designee. The matter was t r i e d t o t h e d i s c r i c t court and extensive rlndings of f a c t were determined by t h e court together with eor~clusions of law which i n essence found t h a t the City had never received any consideration f o r t h e l i c e n s e s ; t h a t n e i t h e r V i c t o r ' s , i.nc. nor i t s predecessors paid a separate consideration f o r t h e l i c e n s e s on a c q u i s i t i o n ; t h a t t h e r e was adequate consideration <unspecified] t o support t r a n s f e r of t h e l i c e n s e s t o t h e City upon termination by V i c t o r ' s , Inc.; t h a t the City could l e g a l l y ioLd a l i q u o r and a beer l i c e n s e ; and t h a t defendant V i c t o r ' s , Inc. t r a n s f e r t h e l i c e n s e s t o t h e City within t h i r t y days o r t h e c l e r k of court would be authorized t o complete t h e t r a n s f e r of t h e Licenses t o the City. V i c t o r ' s , Inc. presents many i s s u e s f o r review, however, Ehe i o n t r o l l i n g i s s u e i s whether t h e City must pay consideration so V i c t o r ' s , Inc. f o r t h e assignment of i t s i n t e r e s t i n t h e liquor and beer l i c e n s e s t o t h e City o r i t s designee. The s u i t is a s p e c i f i c performance action which means i-t jeeks t o compel t h e performance of a contract i n t h e p r e c i s e L e r m s agreed upon. The foundation of a s u i t f o r s p e c i f i c performance uf a contract i s t h a t by compelling t h e p a r t i e s t o do t h e very rhings whey have agreed t o do more complete j u s t i c e i s a t t a i n e d ehan by giving damages f o r breach of contract. It i s an extra- drdinary remedy, which was not recognized a t common law. So, s p e c i f i c performance i s purely an e q u i t a b l e remedy and is governed b y equitable principles. 8 1 C.J.S. Specific Performance 5 1, p. 408. In 8 1 C.J.S. Specific Performance 5 3 , p. 411, it i s t t k ; t s p e c i f i c performance w i l l be ordered only on equitable grounds i n view of a l l the conditions surrounding t h e p a r t i c u l a r case. ;k ; k 9~ I I A b i l l in equiry for s p r c i r i c performar~ce i s an appeal t o t h e conscience of the court, and senerally, i n such a proceeding, the inquiry must 5e whether, i n equity and good conscience, the court should specifically enforce the contract. I I 4ection 17-808, R.C.M. 1947, s t a t e s t h a t specific perior~uiince cannot be enforced against a party t o a contract I I i L t h a t party has not received an adequate consideration f o r c h e contract. " Whether consideration is adequate f o r a given dontract depends on the f a c t s and circumstances of each case. Therefore, we are required t o closely examine the f a c t s and :ircumstances surrounding t h i s case t o determine whether the zonsideration i n the contract was adequate t o equitably j u s t i f y 1 t h e assignment of Victor's, Inc. s i n t e r e s t i n the licenses t o the City. Although t h i s s u i t i s brought only t o enforce a pro- v i s i o n i n a lease between the City and Victor's, Inc., the determination as t o whether the consideration f o r assignment I ai ~ i c t o r ' s , Inc. s i n t e r e s t was adequate cannot be made by ~ooking only t o the contents of the lease. In negotiations f o r the lease, the City and v i c t o r ' s , Inc. were aware of the f a c t t h a t v i c t o r ' s , Inc. had paid a substantial amount of money f o r i n r e r e s t i n the bar f i x t u r e s , licenses and the previous lease. Both p a r t i e s were a l s o aware of the f a c t t h a t although a l l previous leases contained provisions requiring assignment of the alcohol licenses themselves upon termination of the lease, t h i s provision had never been employed by the City--although the opportunity f o r i t s use had arisen on four occasions. These additional f a c t s a r e pertinent here. The d i s t r i c t c o u r t held: Id- .r- #% , & ;r .+t no t i m e did the C i t y 3f Great Falls ever receive any independent o r separate con- sideration o r payment f o r t r a n s f e r by i t of the iiquor and beer licenses t o Robinson o r t o any of t h e other lessees, including defendant. I I . A s heretofore s e t f o r t h , the City i n dealing with Robinson firs^ zlaimed ownership of the licenses. Thereafter t h e City f i l e d a Jocument with the Montana Liquor Control Board s e t t i n g f o r t h t h a t 1 1 t h e City For a good and valuable consideration * ; k * s e l l , assign arid t r a n s f e r and s e t over unto Don F. Robinson * * * a l l r i g h t , c i c l e and i n t e r e s t i n and t o ; k f ; " the licenses here i n question. Thereafter, the lease arrangement was a l t e r e d t o s e t f o r t h t h a t zhe City was the o r i g i n a l owner, r a t h e r than owner. Robinson and a l l subsequent lessees and sublessees were allowed t o s e l l t h e i r i n t e r e s t s i n the bar f i x t u r e s , licenses and the lease t o the succeeding lessee f o r whatever price the current business market would bear. The City was involved i n these sales orily t o the extent of consenting t o the assignments. The City a t no time received the licenses from the vendor-assignor and then reassigned the licenses t o the vendee-assignee. Four previous Leases expired and the City did not demand return of the licenses. Public-record ownership [ a t the Montana Liquor Control %oardl showed the lessees t o be the sole owners of the licenses. Section 4-410, R.C.M. 1947, requires t h a t the names of a l l persons iucerested i n the license must appear on the application f o r the license. Section 4-412(7), R.C.M. 1947, provides t h a t a license I f may not be issued t o one who i s not the owner and operator of t h e business. " (Emphasis supplied), A l l applicable federal, s t a t e and l o c a l fees and taxes atcrndant with the licenses were paid by the lessees, including ~ i c t o r ' s , Inc. O n three occasions, the licenses were mortgaged by various lessees t o a bank o r other corporation f o r loans of money. The licenses were used a s c o l l a t e r a l and the mortgages duly recorded with the Montana Liquor Control Board a s required by law. The City consented t o a l l three mortgages. Montana Bank of Great F a l l s is currently a mortgagee of the licenses on a loan f o r approximately $40,000. O n two occasions - i n 1954 and 1955 - contracts f o r s a l e were used t o convey the assignment of the lease and licenses from one lessee t o another. Language i n t h e contracts provided t h a t upon default, the licenses would be s e t over t o t h e vendor-lessee and they s h a l l belong t o the vendors. N o mention of the Clty's I I ownershipf' is made i n these contracts. Copies of these contracts were f i l e d with t h e Montana Liquor Control Board and the City. Extensive argument was presented concerning the negotiation with Palmer, the a i r p o r t manager, and Victor's, Inc. on the very point of compensation f o r the licenses upon termination o r sale. It seems t o be admitted t h a t t h i s took place and Palmer did have authority t o negotiate a i r p o r t contracts, but former members of the a i r p o r t commission could not confirm any agreements on t h i s issue. Yet, coincidently a t t h i s time, the City elected t o change the language a s it pertained t o reassignment i n the lease from a reassignment of the licenses t o a reassignment of l e s s e e ' s [Victor's, Inc.] i n t e r e s t i n the licenses. Together with a l l of these f a c t s there i s a disputed probability t h a t the same lease i n t e r e s t assignment clause gave Victor's, Inc. the r i g h t t o s e l l i t s i n t e r e s t i n the licenses upon assignment, with consent of the City. Indulging t h e City with the presumption, which we think w e must, t h a t it complied with the laws of the s t a t e of Montana and t h a t a l l of i t s dealings with i t s lessees were honest and open and none were intended t o evade the licensing laws of the s t a t e of Montana and i t s affirmative a c t s o r non-action over t h e term of these transactions indicated i t s intentions, t h e City could have no i n t e r e s t i n the licenses themselves. It did a t a l l cirues by Lease dgreeine~li; d i o v l d e inac she I-lcenses nust stay with t h e location by assignment when the l e s s e e terminated h i s business r e l a t i o n s h i p with t h e City. v i c t o r ' s , Inc. agrees t h a t rhe l i c e n s e s cannot be moved from the a i r p o r t . These l i c e n s e s a r e personal property and have a recognized value above and beyond t h e f e e s paid t o t h e various government dgencies. These l i c e n s e s acquired t h i s type of value because t h e Clry never required nor controlled t h e reassignment of t h e l i c e n s e s when a l e a s e terminated. I f the City had enforced t h e l e a s e ~ r o v i s i o n s it could have reassigned t h e l i c e n s e s on each trans- dction and t h e new l e s s e e would then n o t have been required t o Day t h e seller f o r t h e licenses. The City d i d not do t h i s . It acquiesced i n t h e t r a n s f e r s d l r e c t l y from party t o p a r t y f o r cash consideration with t h e r e s u l t chat t h e l i c e n s e s acquired value t o t h e p a r t i e s and they paid ~ o r ~ s i d e r a t i o n f o r them. v i c t o r ' s , Inc. was therefore e n t i t l e d t o r e l y upon t h e a c t s and conduct of t h e City t h a t , when t h e t i m e L-arne f o r an assignment from V i c t o r ' s , Inc . , it could assign t o the new operator of the business and be compensated f o r t h e value of t h e Licenses. However, t h e City decided t o assign t h e l i c e n s e s t o t h e new l e s s e e , Dyneteria, Inc., without compensation from it and now demands t h a t v i c t o r ' s , Inc. make a g r a t u i t o u s assignment. A s heretofore s t a t e d , t h e City has the r i g h t t o i n s i s t on V i c t o r ' s , t Lnc. s assignment of i t s i n t e r e s t i n t h e l i c e n s e s b u t i f t h e City would l i k e t o bestow t h i s g r a t u i t y upon Dyneteria, Inc., t h e City must compensate V i c t o r ' s , Inc. i n an amount equal t o the t r u e market value of t h e personal property. The City claims and t h e t r i a l court held t h a t adequate consideration supported t h e t r a n s f e r demanded by t h e City, although t h e court d i d not specify t h e nature of t h e consideration. Generally speaking, consideration i s the price bargained f o r and paid f o r a promise. 17 C.J.S. Contracts $70, p. 747. Consideration s u f f i c i e n t t o warrant specific performance f o r the assignment of valuable personal property such a s liquor licenses j u s t be obvious and unambiguous. In reviewing the consideration f o r the two contracts, the consideration which supports the lease between the City and v i c t o r ' s , Inc. was similar t o the consideration which had supported e a r l i e r leases between t h e City and p r i o r lessees. The lessee was t o pay the City monthly r e n t ($600 per month i n the current lease) and operate the lounge under estab- lished minimum specifications. The City i n return leases t h e space t o the various parties. The consideration which supported the s a l e s and assign- ments of i n t e r e s t between successive lessees was an exchange of money, e i t h e r d i r e c t l y o r under a contract f o r s a l e , i n return f o r t h e package of (a) bar f i x t u r e s , (b) licenses, and (c) lease- hold. The i n t e r e s t i n those three items was sold a s a u n i t , but it i s c l e a r t h a t the most important item of the three was t h e licenses. A liquor license i s a valuable piece of personal property. Witness t h e $40,000 mortgage obtained by v i c t o r ' s , Inc. from a bank with the beer and liquor licenses used a s c o l l a t e r a l . Stallinger v. Gcs S , 121 Mont. 437, 438, 193 P.2d 810. I f a l l t h a t was sold between vendor and vendee lessees was the f i x t u r e s i n a leased bar, it i s c e r t a i n t h a t the s a l e p r i c e would be substantially l e s s than i f beer and liquor licenses a l s o were included i n the sale. The City claims t h a t the "City's willingness t o allow the t r a n s f e r of the licenses and lease t o [ v i c t o r ' s , Inc. ] and t o permit [Victor's, Inc.] t o continue i n possession of the premises a f t e r expiration of the i n i t i a l lease i s a l l the consideration which i s necessary t o support the agreement t o reassign." With t h i s , we cannot agree. The City's willingness t o allow the transfer of the lease i n t e r e s t and t o permit Victor's, Inc. t o continue i n possession of the premises i s consideration s u f f i c i e n t only t o obligate v i c t o r ' s , Inc. t o pay the r e n t and abide by t h e other general terms of the lease, excluding the reassignment provision. It stretches the imagination of fairness t o say t h a t the C i t y ' s willingness t o allow t h e t r a n s f e r of the licenses t o Victor's, Inc. ( i . e . , t o allow v i c t o r ' s , Inc. t o pay f a i r market value f o r the licenses t o a t h i r d party) is consideration f u l l y s u f f i c i e n t o r adequate t o force v i c t o r ' s , Inc. t o assign t h e licenses t o t h e City. In examining the above two contracts and especially the r a t h e r standard lease arrangement, together with t h e considera- t i o n which supported them, we do not find consideration'to support t h e assignment of t h e licenses t o the City o r Dyneteria, Inc. The judgment of t h e d i s t r i c t court i s reversed and the cause remanded t o the d i s t r i c t court with instructions t o determine f a i r market value of t h e licenses t o be paid Victor's, Inc., and t h e completion of the transaction i n accordance with t h i s opinion.