Case Title: BENNETT v MAHONEY

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1973-03-22T00:00:00Z

Document:
N o . 12345 IN THE SUPREME COURT OF THE STATE OF MONTAFA 1973 GARRY V . BENNETT, Plaintiff and Appellant, HARRIETT V . MAHONEY and STELLA FOOTE , Defendants and Respondents. Appeal from: District Court of the Thirteenth Judicial District, Honorable C . B . Sande, Judge presiding. Counsel of Record: For Appellant : Crowley, Kilbourne, Haughey, Hanson and Gallagher, Billings, Montana Robert Edd Lee argued, Billings, Montana For Respondents: Anderson, Syrmnes, Forbes, Peete and Brown, Billings, Montana Rockwood Brown, Jr. argued, Billings, Montana Submitted: January 25, 1973 Decided :MAR 2 3 1973 Filed: 2 8 lgs M r . J u s t i c e Gene B. Daly delivered the Opinion of the Court. This appeal i s taken from a judgment f o r defendants entered by the d i s t r i c t court of Yellowstone County on an action f o r declaratory judgment. The matter was submitted t o t h i s Court on written b r i e f s and stipulated f a c t s , with a l l pertinent agreements and correspondence attached a s exhibits, The controversy involved a lease agreement o r i g i n a l l y entered i n t o on September 29, 1945, t o run u n t i l December 31, 1970. The property involved was a commercial s i t e on Montana Avenue in Ei!lings. The original p a r t i e s involved were John W, and Margaret L. Foote a s lessors and Clark K, Fergus a s lessee. The lessee constructed a supermarket, ~IIGPJII a s Clark's Market, which he operated f o r about twenty-two years. The property was then subleased t o a l o c a l department s t o r e . The o r i g i n a l twenty- f i v e year lease contained an option f o r a ten year extended term upon i t s expiration, with provision f o r a r b i t r a t i o n i n the event the p a r t i e s could not agree on the terms of the extended lease, Before expiration of the o r i g i n a l lease, Garry V. Bennett, p l a i n t i f f and appellant (hereinafter referred t o a s l e s s e e ) , succeeded t o the i n t e r e s t s of Clark K. Fergus. H a r r i e t t V. Mahoney and S t e l l a Foote, defendants and respondents, (hereinafter referred t o a s ~ l e s s o r s ) , succeeded t o the i n t e r e s t s of John and Margaret Foote. Immediately prior t o the expiration of the orig- i n a l lease, lessors and lessee negotiated concerning the optional ten year extended term, but were unable t o agree on the amount of r e n t a l . I n addition, they could not agree whether o r not the new r e n t a l should be ground r e n t a l only o r based on improvements by lessee. The matter was l i t i g a t e d i n the d i s t r i c t court and by order and judgment dated September 22, 1970, t h a t court held: "IT I S ORDERED, ADJUDGED AND DECREED, That under the provisions f o r determination of the r e n t a l t o be paid by p l a i n t i f f s (Garry Bennett and E l s i e Fergus) during the extended term of the lease which i s the subject of t h i s action, the a r b i t r a t o r s acting pursuant t o said lease should consider only ground r e n t a l and not improvements placed thereon by the lessee and h i s successors i n i n t e r e s t , i n determining the r e n t a l applicable during the ex- tended term commencing January I, 1971." Pursuant t o the terms of t h i s order and judgment and the provisions of the o r i g i n a l lease contract, three a r b i t r a t o r s met and on December 22, 1970, arrived a t the following r e n t a l agreement : "Rent s h a l l be a t the r a t e of $3,400.00 per annum, s t a r t i n g January 1, 1971, f o r a period of f i v e years through December 31, 1975, with the option t o renew f o r an additional f i v e year period, with r e n t a t $4,000.00 per year, s t a r t i n g January 1, 1976 and ending December 31, 1980. "As further consideration, we amend the o r i g i n a l lease wherein the lessee CLARK K. FERGUS w i l l pay a l l taxes---more s p e c i f i c a l l y , the $200.00 pre- viously carred by the lessor, JOHN W. FOQTE." Lessee, through h i s attorney, sent a l e t t e r t o the attorney f o r the lessors, dated January 7, 1971, i n which lessee attempted t o accept the a r b i t r a t o r s ' determination of December 22, 1970, and extend the lease f o r an additional ten years. Lessors, through t h e i r attorney, refused the attempted exercise of the extension option on the grounds t h a t it was submitted past t h e ten day acceptance period provided f o r i n the o r i g i n a l lease i n these terms : * * The three persons so selected s h a l l consti- t u t e a board of a r b i t r a t i o n f o r the purpose of de- termining the r e n t a l of said leased premises f o r a ten year extended term thereof, and s h a l l promptly agree by a majority vote on such r e n t a l , which i n no event be l e s s than Fifteen Hundred Dollars ($1,500.00) per annum. Within ten days a f t e r such board of arbi-- t r a t i o n - - - f i x e s such r e n t a l , said lessee shaii-?iotify said lessors i n writing whether o r not he wishes t o exercise h i s - option t o extend the terms of t h i s lease - - f o r an additional period of ten years on the r e n t a l fixed by said board of a r b i t r a t i o n and both lessors and lessee w i l l be bound by the decision of said lessee. I' (Emphasis supplied), O n January 20, 1971, lessee sent a l e t t e r t o l e s s o r , S t e l l a Foote, and t o each of the three members of the board of a r b i t r a - t o r s , requesting the extension lease matter be resubmitted t o a r b i t r a t i o n on the basis t h a t the a r b i t r a t i o n award f a i l e d t o follow the instructions of the o r i g i n a l lease, because the r e n t a l determination was f o r a period of f i v e r a t h e r than ten years. Lessors continued i n t h e i r position t h a t lessee enn nett's f a i l u r e t o make a timely acceptance of the a r b i t r a t i o n agreement had terminated a l l h i s i n t e r e s t . O n April 27, 1971, lessee Bennett f i l e d a declaratory judgment action i n d i s t r i c t court f o r a determination of these matters. O n August 16, 1972, the d i s t r i c t court rendered i t s findings of f a c t , conclusions of law and judgment i n favor of defendant lessors, which s t a t e d i n part: "IT IS HEREBY ORDERED, ADJUDGED AND DECREED a s follows: "1. That the Arbitration Award rendered by the Board of Arbitrators on December 22, 1970, Exhibit ' C ' , was within t h e authority and l i m i t s of the sub- mission i . e , the Lease and Decree of Court, Exhi- 1 t b i t s 'A and B ' respectively, and was legally v a l i d and e f f e c t i v e between the p a r t i e s t o said lease. "2. That the p l a i n t i f f and h i s predecessors i n i n t e r e s t f a i l e d t o exercise t h e i r option t o extend said Lease f o r an additional ten (10) years upon the terms of said Arbitration Award within the time and i n the manner a s required by said Lease instrument and by reason of t h i s f a i l u r e , the e n t i r e r i g h t , t i t l e and i n t e r e s t of the p l a i n t i f f and h i s predecessors i n i n t e r e s t a s Lessee under said Lease a r e f u l l y termin- ated a s of the end of the i n i t i a l term. 2 k * *If Lessee appeals from t h a t f i n a l judgment and presents two areas i n which the a r b i t r a t o r s exceeded t h e i r authority. 1. The a r b i t r a t i o n award only established the renewal lease f o r a period of f i v e years, r a t h e r than ten years a s re- quired by the submission agreement, 2, The a r b i t r a t i o n award s h i f t e d the payment of c e r t a i n taxes from lessors t o the lessee, which was not within the authority of the a r b i t r a t o r s . W e find no merit i n l e s s e e ' s contention the a r b i t r a t i o n award was rendered f o r a period of f i v e r a t h e r than ten years. The award, hereinabove quoted, c l e a r l y established a r e n t a l f o r the ten year period from January 1, 1971 t o December 31, 1980, and lessors a r e bound f o r t h a t e n t i r e period of time. The f a c t there was a $600 increase i n annual r e n t a l and an option t o renew scheduled t o take e f f e c t on January 1, 1976, i n no way relinquishes the obligations of the lessors t o be bound by the terms of the lease f o r the e n t i r e ten years. I f anything, i t operates t o the advantage of the lessee, giving him a u n i l a t e r a l option t o cancel a t the "half way point" i n the l i f e of the lease. W e find nothing i n the terms of the submission agreement which precluded the a r b i t r a t i o n board from esta,blishing d i f f e r e n t r e n t a l s f o r d i f f e r e n t years within the l i f e of the ten year ex- tension lease. W e a l s o find no merit i n l e s s e e ' s contention the disposi- t i o n of t h e tax obligation was not within the authority of the a r b i t r a t o r s i n fixing the r e n t a l f o r the ten year extension lease period. Under circumstances other than those involved here, there might have been merit i n t h i s contention, However, i n looking t o the terms of the o r i g i n a l twenty-five year lease agreement, we f i n d i t was established i n 1945 that lessors would pay a l l taxes up t o $200 per annun and lessee would pay any taxes i n excess of t h a t amount, Thus, the payment of taxes was very much a part of the "rental" obligation o r compensation between the lessors and lessee under the terms of the o r i g i n a l lease. This f a c t made it incumbent upon the a r b i t r a t i o n board t o make some disposition of the tax payment issue i n the "rental" terms of the ten year extension lease. The disposition i t made appears i n no way unreasonable t o t h i s Court, nor does it seem particularly unusual, since under t h e o r i g i n a l lease agreement lessee was paying p a r t of the taxes, under the ten year extension lease he would have paid them a i l . In McIntosh v. Hartford F i r e Ins. Co, , 106 Mont. 434, 439, 78 P.2d 82, t h i s Court s t a t e d the applicable general r u l e : "It i s the policy of the law t o favor the settlement of disputes by a r b i t r a t i o n , and every reasonable in- tendment w i l l be indulged t o give e f f e c t t o such proceedings. A n award made by appraisers o r a r b i t r a t o r s should not be vacated unless it was made without authority, o r a s a r e s u l t of fraud o r mistake, or misfeasance o r malfeasance of the appraisers. 1 1 See a l s o : Lee v, P r ~ v i d e n c e Washington Ins. Co., 82 Mont. 264, 266 P, 640; Crosby v, Board of Hail Insurance, 113 Mont, 470, 29 P.2d 99; 5 Am Jur Zd, Arbitration and Award $ 5 137,167. Appellant lessee has not sustained the burden of estab- lishing e r r o r abuse i n the award made by the a r b i t r a t o r s , Therefore, the judgment of the d i s t r i c t court i s affirmed, - Associate J u s t i c e / / Chief ~ u s t i c e / c i a t e Justices.