Title: LEMLEY v BOZEMAN COMMUNITY HOTEL

State: montana

Issuer: Montana Supreme Court

Document:

No. 82-117 IN THE SUPREME COURT OF THE STATE OF MONTANA 1982 MICHAEL J. LEPKLEY and JOAN F. LEMLEY, Plaintiffs and Appellants, VS. BOZEMAN COMMUNITY HOTEL COMPANY, a Montana corp., and ROGER L. CRAFT, President, Defendants and Respondents. Appeal from: District Court of the Eighteenth Judicial District, In and for the County of Gallatin Honorable W.W. Lessley, Judge presiding. Counsel of Record: For Plaintiffs: Joseph Mudd, Bridger, Montana For Defendants: Edmund Sedivy, Bozeman, Montana Submitted on briefs: July 15, 1982 Decided: September 30, 1982 Filed: $EP 3 0 'i982 Clerk Mr. J u s r i c e Frank 8. Morrison, J r . , d e l i v e r e d t h e Opinion of t h e Court. Nichael and J o a n Lemley a p p e a l t h e February 5, 1 9 8 2 , judgment of t h e D i s t r i c t Court of t h e E i g h t e e n t h J u d i c i a l D i s t r i c t a d o p t i n g t h e l a n d l o r d , Bozeman Community H o t e l Company's i n t e r p r e t a t i o n of t h e r e n t c l a u s e of a November 29, 1976, a s s i g n e d l e a s e between t h e p a r t i e s . W e a f f i r m t h e judgment of t h e D i s t r i c t Court. On May 1 9 , 1975, P a u l C a r t e r , P r e s i d e n t of RX Enter- p r i s e s , I n c . , e n t e r e d i n t o a l e a s e w i t h r e s p o n d e n t s f o r p r e m i s e s i n t h e "Baxter H o t e l , " Bozeman, Montana. The l e a s e was f o r t h e p e r i o d from January 11, 1976 t o J a n u a r y 1 0 , 1961. With respondent l a n d l o r d ' s p e r m i s s i o n , P a u l C a r t e r a s s i g n e d h i s l e a s e t o Michael and Joan Lemley on November The l e a s e c o n t a i n s a c l a u s e a l l o w i n g f o r its renewal f o r two a d d i t i o n a l f i v e - y e a r c o n s e c u t i v e terms. That c l a u s e s t a t e s : " 1 9 . T h a t upon t h e e x p i r a t i o n of t h e primary term of t h i s Lease and Agreement, t h a t is t o s a y from J a n u a r y 11, 1976, through and i n c l u d i n g J a n u a r y 1 0 , 1981, Tenant is g r a n t e d t h e o p t i o n t o l e a s e t h e s e premises f o r two ( 2 ) a d d i t i o n a l f i v e ( 5 ) y e a r c o n s e c u t i v e terms w i t h t h e same terms and c o n d i t i o n s a s h e r e i n a b o v e set f o r t h f o r each o f t h e f i v e ( 5 ) y e a r c o n s e c u t i v e p e r i o d s , w i t h t h e e x c e p t i o n t h a t t h e amount of minimum b a s e r e n t a l i n t h e sum of Four Hundred D o l l a r s ($400.00) a s set f o r t h nereinabove, s h a l l a t t h e e x p i r a t i o n of t h e f i r s t f i v e ( 5 ) y e a r l e a s e p e r i o d be changed a s f o l l o w s : " ( a ) The sum of t h e b a s e r e n t a l s h a l l be changed t o r e f l e c t t h e i n c r e a s e o r de- c r e a s e i n t h e c o s t of l i v i n g index occur- r i n g d u r i n g t h e f i r s t f i v e ( 5 ) y e a r s f o r t h e term of t h i s Lease and Agreement s h a l l e i t h e r i n c r e a s e o r d e c r e a s e t h e amount of base r e n t a l t o be p a i d ( i n t h e sum of $400.60 p e r month) by t h e same p e r c e n t a g e which t h e consumer p r i c e index has risen or fallen during the first five (5 j years of this lease. " ' l ' h e percentage of increase or decrease, if any, at the end of said five (5) year period shall be multiplied by the monthly rental of $400.00 and the product of such multiplication shall be the amount of the Tenant's minimum rental for each month during the second five (5) year period of this lease, subject to paragraph (b) below. "The consumer price index is and shall be the price index computed by the United States Bureau of Labor Statistics, being the national consumer price index for the urban wages and clerical workers, generally referred to as the 'Cost of Living Index'. " ( b ) The sum of the base rental shall also be changed to reflect the yearly increase or decrease in the cost to Landlord of property taxes and utilities. The percentage of any increase or de- crease of these items from date hereof until the termination of the first five (5) year period shall be multiplied by monthly rental derived under paragraph (a) above, and such multiplication shall be the amount of the Tenant's monthly rental for each month during the second five (5) year period commencing with the first month to the second five (5) year period." Mr. Lemley notified Roger Craft, president of Bozeman Community Hotel Company, that he wished to renew the lease for an additionai five-year period beginning on the 10th of January, 1981. Mr. Craft informed Mr. Lemley that pursuant to Clause 19 of the lease, the monthly rent would increase from $400.00 to approximately $1250.00. Mr. Craft arrived at the $1250 figure by using the following formulas, pursuant to Clause 19: (a) Amount of Base Percentage of Increase or Rent x Decrease Cost of Living Index and ( b ) Amount of Monthly P e r c e n t a g e of I n c r e a s e o r R e n t a l Derived x Decrease C o s t of P r o p e r t y From ( a ) Taxes and U t i l i t i e s Mr. Lemley d i s a g r e e d . He argued t h a t a l t h o u g h formula ( b ) above c o r r e c t l y r e f l e c t s t h e language of t h e formula set f o r t h i n Clause 1 9 ( b ) , t h e language of t h e formula is n o t c o n s i s t e n t w i t h t h e s t a t e d i n t e n t of C l a u s e 1 9 ( b ) . The i n t e n t is found i n t h e f i r s t s e n t e n c e of Clause 1 9 ( b ) , " t o r e f l e c t t h e y e a r l y i n c r e a s e o r d e c r e a s e i n t h e c o s t t o Land- l o r d of p r o p e r t y t a x e s and u t i l i t i e s . " On February 26, 1981, Lemley f i l e d a c o m p l a i n t i n t h e E i g h t e e n t h J u d i c i a l D i s t r i c t C o u r t r e q u e s t i n g , among o t h e r t h i n g s , a d e c l a r a t o r y judgment c o n s t r u i n g t h e t e r m s of t h e l e a s e . A s an a l t e r n a t i v e and i n keeping w i t h Lemley's p e r c e i v e d i n t e n t of t h e c l a u s e , h e s u g g e s t e d t n a t t h e p e r c e n t a g e i n c r e a s e b e added t o t h e new b a s e r e n t r a t h e r t h a n be m u l t i p l i e d by it. H e p r e s e n t e d no formula by which t o accomplish t h a t r e s u l t . Lemley p r e s e n t e d two o t h e r c a u s e s of a c t i o n i n h i s complaint. H e r e q u e s t e d c r e d i t f o r u t i l i t i e s p a i d by him c o n t r a r y t o t h e terms of t h e l e a s e and compensation by Bozeman Community H o t e l f o r l o s s of income s u f f e r e d when t h e l a n d l o r d u n r e a s o n a b l y d e n i e d Lemley's r e q u e s t s t o s u b l e t t h e premises. A h e a r i n g was h e l d October 1 9 , 1981, f o l l o w i n g which t h e D i s t r i c t Court i s s u e d a judgment February 5, 1982, o r d e r i n g : 1. That l a n d l o r d r e c o v e r from Lemley, " t h e sum of $3,908.01, being t h e sum o f $1,257.60 p e r month f o r r e n t from J a n u a r y , 1981, through October, 1981, f o r a t o t a l r e n t a l of $12,576.00, less t h e surn of $7,220.00 as p a i d through d a t e of October, 1981, and l e s s t h e sum of $1,477.99 f o r e l e c t r i c a l b i l l s p a i d by P l a i n t i f f s . " 2. That Lemleys pay t o l a n d l o r d " t h e sum of $1,257.60 per month from November 11, 1982 and on t h e 1 1 t h day of each month t h e r e a f t e r , f o r t h e remaining term of t h e Lease of t h e premises i n t h e b a x t e r Hotel, r e f e r r e d t o a s t h e i3axter Pharmacy, through January 9, 1986." 3. That Lemley's c l a i m f o r damages caused by land- l o r d ' s f a i l u r e t o c o n s e n t t o s e v e r a l proposed s u b l e t t e r s be dismissed. 4. That a t t o r n e y f e e s and c o s t s t o t a l i n g $3,263.00 be awarded l a n d l o r d . I n a p p e a l i n g t h e judgment, Lemley p r e s e n t s t h e follow- ing i s s u e s f o r our review: 1. What is t h e proper i n t e r p r e t a t i o n of Clause 19 of t h e i e a s e and agreement? 2. Did t h e D i s t r i c t Court p r o p e r l y determine t h e amount of r e n t owing and t o be p a i d ? 3. Was l a n d l o r d ' s d e n i a l of c o n s e n t t o s u b l e a s e unreasonable? 4 . Was Lemley e n t i t l e d t o recover a t t o r n e y f e e s i n c u r r e d w i t h r e g a r d t o h i s c l a i m f o r c r e d i t f o r t h e payment of t h e e l e c t r i c a l b i l l s ? W e a f f i r m t h e d e c i s i o n of t h e D i s t r i c t Court i n a l l r e s p e c t s . The D i s t r i c t Court p r o p e r l y i n t e r p r e t e d Clause 1 9 of t h e l e a s e . Courts have no a u t h o r i t y t o change a c o n t r a c t when i t s i n t e n t is c l e a r . Williams v. I n s u r a n c e Company of North America ( 1 9 6 7 ) , 150 Mont. 292, 295, 4 3 4 P.2d 395, 397. C o u r t s do i n t e r p r e t c o n t r a c t s when an ambiguity e x i s t s . An ambiguity e x i s t s "wnen t h e c o n t r a c t t a k e n a s a whole i n its wording o r phraseology is r e a s o n a b l y s u b j e c t t o two d i f - f e r e n t i n t e r p r e t a t i o n s . " Williams v. I n s u r a n c e Company of North America, s u p r a . No ambiguity e x i s t s i n Clause 1 9 ( b ) . The f i r s t s e n t e n c e s t a t e s t h e i n t e n t of t h e c l a u s e . The formula f o l l o w i n g d i c t a t e s how t h e i n t e n t s h a l l be accomplished. Taken a s a whole, t h e c o n t r a c t is r e a s o n a b l y s u b j e c t t o o n l y one i n t e r p r e t a t i o n . The formula is c l e a r and e x p r e s s . C o u r t s may n o t d i s r e g a r d t h e e x p r e s s language of a c o n t r a c t . Williams v. I n s u r a n c e Company of North America, s u p r a . 'I'herefore, t h e D i s t r i c t C o u r t p r o p e r l y a d o p t e d t h e f o r m u l a f o r r e n t i n c r e a s e s t a t e d w i t h i n Clause 19. Lemley f u r t h e r complains t h a t he r e q u e s t e d o n l y a d e c l a r a t o r y judgment c o n s t r u i n g t h e terms of t h e l e a s e , not a c o u r t d e t e r m i n a t i o n of t h e r e n t amount owed p u r s u a n t t o t h e l e a s e . A t t r i a l , Bozeman Community Hotel i n t r o d u c e d many e x h i b i t s concerning t h e c o s t of l i v i n g index from 1976 t o 1981 and t h e h o t e l ' s p r o p e r t y t a x and u t i l i t y expendi- t u r e s from 1975 t o 1980. It t h e n p r e s e n t e d t h e f o l l o w i n g c h a r t a p p l y i n g t h e f i g u r e s d e r i v e d from t h e o t h e r e x h i b i t s t o t h e formulas s e t f o r t h i n Clause 19: ( a ) Amount of Base P e r c e n t a g e o f I n c r e a s e o r Rent x Decrease Cost of Living Index Amount of a a s e Cost of L i v i n g J a n u a r y 1981 Rent x Cost of Living January 1976 ( b ) Amount of Monthy P e r c e n t a g e of I n c r e a s e o r R e n t a l Derived x Decrease Cost of P r o p e r t y From ( a ) Taxes and U t i l i t i e s Amount o t Monthly Cost of P r o p e r t y -Taxes and R e n t a l Derived x U t i l i t i e s 1980 From ( a ) Cost o f P r o p e r t y Taxes and U t i l i t i e s 1975 No o b j e c t i o n s were made t o t h e admission of t h o s e e x h i b i t s . Lemley d i d r e q u e s t o n l y a d e c l a r a t o r y judgment i n h i s complaint. However, by f a i l i n g t o o b j e c t t o t h e a d m i t t a n c e of t h e above e v i d e n c e used by t h e c o u r t t o d e t e r m i n e t h e proper r e n t amount, he i m p l i e d l y consented t o t h e r e n t amount b e i n g d e t e r m i n e d by t h e c o u r t . R u l e 1 5 ( b ) , 1ul.K.Civ.P.; R e i l l y v. M a w ( 1 9 6 5 ) , 146 Mont. 145, 155, 4 0 5 P.2d 4 4 0 , 446. T h e r e f o r e , we a f f i r m t h e D i s t r i c t C o u r t ' s d e t e r m i n a t i o n of t h e amount of r e n t owing and t o be p a i d . The c o u r t a c t e d w i t h i n t h e scope of t h e p l e a d i n g s , a s amended. C l a u s e 9 of t h e l e a s e i n q u e s t i o n r e q u i r e s l a n d l o r d c o n s e n t p r i o r t o t h e s u b l e t t i n g of t h e premises. I t a l s o r e q u i r e s t h a t l a n d l o r d n o t u n r e a s o n a b l y w i t h h o l d s u c h c o n s e n t . Lemley provided t h e c o u r t w i t h t h e f o l l o w i n g i n f o r m a t i o n c o n c e r n i n g h i s a t t e m p t s t o s u b l e a s e t h e premises. With l a n d l o r d ' s a p p r o v a l , Cactus Records s u b l e t t h e basement of Lemley's pharmacy. Lemley l a t e r approached l a n d l o r d i n J a n u a r y 1978 r e g a r d i n g C a c t u s Records s u b l e t t i n g t h e main f l o o r a l s o . Landlord disapproved a s he was wary of Cactus Records' b u s i n e s s p r a c t i c e s . Lemley n e x t approached l a n d l o r d r e g a r d i n g King-Gallatin expanding t h e P o i n t A f t e r a i n t o t h e main f l o o r space. Landlord disapproved a s t h e r e were a l r e a d y two b a r s i n t h e H o t e l and h e wanted no more bar area. Landlord next disapproved Lemley's proposed sublease to an art gallery as he objected to brick work proposed by the gallery owners. Landlord agreed to approve a sublease to Heritage Books provided no pornographic material would be sold. Heritage refused to agree to that term. Finally, in January 1980, Four Seasons Travel Agency sublet the premises with landlord's approval. Lemley vacated the premises in July 1979. Lemley asserted at trial that the premises remained empty for the intervening period due to landlord's unreasonably withneld consent to various proposed subletters. Therefore, Lemley requested a refund of the rent money he lost during the intervening period. The District Court found that the landlord's refusals to permit subletting were reasonable. There is substantial evidence in the record to support such a finding. The land- lord was familiar with Cactus Records as tenants. It did not approve of Cactus Records' business operations or business character. Landlord did not wish to have more bar space within the Hotel as two bars already existed on the premises. Another proposal for subletting was disapproved because landlord did not wish to have a brick wall con- structed on its premises. Given the permanency of such a wall, we cannot find that to be an unreasonable decision. And finally, landlord chose not to have pornography sold on its premises. Given the controversial nature of pornography, it is fair and reasonable for landlord to choose not to be associated with it. Landlord did not contest Lemley's request for compen- sation for the electricity bills Lemley erroneously paid. The bills totaled $1,477.99. The District Court offset the amount of rent owed landlord by $1,477.99. Lemley now requests attorney fees for this successful claim. We deny Lemley's request. Clause 21 of the lease in question provides that in any action for the enforcement of the terms of the lease, or for a breach thereof, the prevailing party shall be entitled to reasonable attorney fees. Landlord is clearly the prevailing party in this action. It is irrelevant that the issue on which attorney fees have been requested was submit- ted as a separate count. See Dooling v. Bright-Holland Co. (1969), 152 Mont. 267, 281, 448 P.2d 749, 757. For the reasons discussed above, we affirm the decision of the District Court. We concur: 7 L - U % , v a ~ q Chief Justice