No. 13164 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1977 

GEORGE R. WEVIN et al., 

Plaintiffs and Respondents, 

-vsTHE COUNTY OF SILVER BOW et al., 

Defendants and Appellants. 

Appeal from: District Court of the Second Judicial District, 

Honorable Jack D. Shanstrom, Judge presiding. 

Counsel of Record: 

For Appellants: 

Stimatz and Engel, Butte, Montana 

Lawrence G. Stimatz argued, Butte, Montana 

For Respondents: 

McCaffery and Peterson, Butte, Montana 

John L. Peterson argued, Butte, Montana 

Submitted: March 16, 1977 

"fiQ" 7,- 

Decided : -. -.'. . ; :TT / 

- *itr;%" ?- 

[:<I/~( Filed: - 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

This is an appeal by Silver Bow County from an adverse 

judgment in a breach of contract case involving the lease of the 

restaurant and lounge facility at the county airport. The cause 

was tried before Hon. Jack D. Shanstrom, sitting without a jury, 

in the district court, Silver Bow County, on January 27, 1975. 

Judgment was entered April 23, 1975. From this judgment in favor of 

plaintiffs , defendant county appeals. 

In 1968, the commissioners of Silver Bow County established 

by resolution an airport commission to act as an advisory commission to the Board of County Commissioners and charged it with the 

duty of an overall program of development and control of the airport. Day to day control for the airport operation was vested 

in the airport manager and engineer. 

In 1968, Wm. J. Violet leased the premises set aside for a 

lounge and restaurant consisting of approximately 4,100 square 

feet. At this time the lounge and restaurant were not completed. 

Later Violet abandoned the lease and the premises were idle for 

approximately 8 months. The county (lessor) then executed a lease 

agreement with plaintiffs George R. Nevin and Geraldine Nevin, 

(Lessees). Paragraph 2 of the lease recognized some deficiencies 

in the premises and agreed to install a dumb waiter, carpet on the 

second floor, and further railing on the balcony. Paragraph 3 

of the lease breaks the rental of $300 per month into $175 rent, 

and $125 as lessees' share of water and electricity until the improvements were completed; then the basic rent would be $375, plus 

$125 for lessees' share of water and electricity, or a total rental 

of $500 per month. 
The lease became effective November 30, 1968 and lessees 

paid the first month's rental required under the lease in December 

5 

1968. paragraphlo£ the lease agreement provides: 

"For the consideration aforesaid, lessor hereby gives - - 

and grants unto lessee, his successors and assigns, the 

right, privilege and option of renewing this Lease, at the 

expiration of the aforementioned term, for an additional 

term of five (5) years, upon the same conditions, covenants 

and agreements herein set forth and at a rental to be negotiated by the parties, by giving to the lessor at least 

ninety days' written notice prior to the expiration of such 

term of lessee's desire to exercise said option and renew 

this Lease for such additional term; provided, however, that 

the rental for the additional term shall not be increased or 

decreased beyond a reasonable sum, taking into consideration 

conditions existing at the time of renewal and capital improvements, if any, on the premises during the term." (Emphasis 

supplied. ) 

On August 28, 1973, lessees mailed the required notice to exercise 

their option provided in paragraph 5 of the lease to extend the term of .. 

the lease for an additional five years. On August 31, 1973, lessor 

responded that the notice was not timely, based on its copy of the 

lease which indicated an effective date of November 1, 1968, inked 

in, rather than November 30, 1968, as shown on lessees' copy. 

There was considerable argument back and forth between the parties 

from August 1973 until October 30, 1973, concerning the renewal. 

On October 30, 1973, lessor proposed a - new lease for a term of 

3 years with a rental of $1,500 per month and/or the premises 

vacated as of October 31, 1973, the date the lessor alleged the 

old lease expired. As a result of this communication an agreement 

was then made to continue operation of the airport facility on a 

reservation of rights for both parties. On November 15, 1973, 

lessor agreed the termination date of the lease was not until 

November 30, 1973 and notice of renewal was received on time. 

Lessees offered a 20% increase in rent or $600. November 20, 

1973, lessor responded with a rental of $1,200 per month and in 

addition requested certain changes in the provisions of the "old" 

lease. On November 30, the lease terminated. 
Lessees finally vacated the premises, after filing an action 

to determine the rights of the parties on January 3, 1974 and 

amended the action on January 25, 1974 to breach of contract. 

Lessor on February 24, 1974 filed an answer generally denying all 

allegations, admitted the lease but denied the effective date of 

November 30, 1968 and alleged it to be November 1, 1968. Based 

on this date, the lessor then by affirmative defense, plead estoppel 

because the lease terminated before notice was received and 

further alleged the lessees knew the date to be wrong. 

After trial, the court made findings of fact and conclusions 

of law stating in essence: 

"1. That Plaintiffs entered into a lease agreement with 

the County of Silver Bow, a body politic and political 

subdivision of the State of Montana, and the Airport Commission of Silver Bow County, Montana, as lessors, on October 

31, 1968, for the lease of certain premises in the Silver 

Bow County Airport Terminal Building, beginning the 30th day 

of November, 1968, and ending on the same date five years 

hence in the year 1973. * * * That at the time of execution 

of the lease agreement, the premises were not ready for 

occupancy and were not made ready for occupancy by lessors 

until November 30, 1968. That as a part of the lease arrangement the Plaintiffs received transfer of Retail Beer and 

Liquor License No. 7847 on December 5, 1968, * * * and paid 

the first month rent in advance on December 5, 1968.* * * 

That it was the intention of all of the parties that the 

Plaintiffs were to have a full five year term of actual 

occupancy in the leasing of the premises. 

''2. * Jc * and as late as November 15, 1973, the Airport 

Board conceded the fact that the lease would not terminate 

until November 30, 1973, and therefore waived any right 

to contend the lease terminated November 1, 1973." 

Finding of fact No. 3, stated plaintiffs had the right to 

renew under paragraph 5 of the lease for 5 years and on August 28, 

1973 and at least 90 days before expiration, advised defendant of 

their intent to renew for 5 years. 

Finding of fact No. 4, states that on August 31, 1973, 

defendant acknowledged plaintiffs' letter to renew but advised 

plaintiffs the notice was too late and defendant, without waiving 
any of its rights because of failure to notify in time, advised 

that it would in essence negotiate a "new" lease. The next 

contact by defendant with plaintiffs was by letter dated October 

30, 1973 advising the lease expired October 31, 1973 and contemporaneous therewith presented a new lease with other terms changed, 

in addition to the rent increase to $1,500 per month. On November 

1, 1973 defendant requested possession by midnight November 1, 

1973, at a penalty of $50 per day for holding over, and then 

offered a 30-day tenancy to plaintiffs to run to November 30, 1973. 

The court further said: 

"* * * That the actions by the Defendants breached the 

terms and conditions of the lease agreement * * * by 

reason of its failure to negotiate a reasonable increase 

or decrease in rental prior to expiration of the term of 

the lease on November 30, 1973. That the offer of the 

Defendants by letter of November 20, 1973, in offering 

a rental change by increase of rent to $1200.00 per month 

and provided other provisions of the lease agreement were 

changed * * * was an unreasonable demand for rent increase 

in violation of Paragraph 5 of the lease agreement, and 

also violated Paragraph 5 of said lease by demanding that 

various other provisions of the lease agreement be changed, 

even though the parties had agreed in the option to renew 

that the lease would be renewed for an additional five 

years 'upon the same conditions, covenants and agreements 

set forth', except for rental. 

"5. That the offer of the Defendants on November 20, 1973, 

was an unreasonable reply to Plaintiffs' offer of November 

15, 1973, to increase the rent to %600.00 per month, * * * 

which the court finds was a reasonable amount for rental 

under the circumstances existing at the time and in view 

of the moderate amount of capital expenditure made during 

the term of Plaintiffs' lease." 

Finding of fact No. 6, states the actions of the parties in 

an attempt to negotiate a "new" lease after November 30, 1973 were 

efforts in compromise of a disputed claim and not material to 

complying with paragraph 5 of the lease. Even if material, this 

increase to $875 is specifically found to be unreasonable in view 

of conditions existing at the time and capital improvements made. 
"7. That Paragraph 5 of the lease agreement cited 

above is a valid, binding and enforceable provision 

of the lease agreement given for the benefit of the 

lessees and relied upon by them as an inducement to 

enter into the lease agreement in October of 1968. 

That in light of said provision, the Court finds that 

it could have fixed and determined a fair and reasonable 

increase in rental in the absence of agreement by the 

parties, and in the further event the Plaintiffs sought 

to elect to enforce such remedy. That Plaintiffs, 

however, are entitled to select any remedy available to 

them, including this action for breach of contract. 

That the parties themselves recognized that such clause 

was valid and enforceable by attempting to negotiate a 

reasonable rental ." 

Finding of fact No. 8, stated that had defendant adequately 

investigated the facts it could have found in August that the 

lease terminated November 30, 1973. Upon admission by November 

15, 1973 of the true facts, defendant was under a firm duty to 

negotiate and fix a reasonable increase or decrease in rent with 

lessees before November 30, 1973. This duty was breached. 

"9. That upon execution of the-lease agreement and 

beginning November 30, 1968, Plaintiffs went into 

possession of the leased premises and for a period of 

five years conducted a restaurant and cocktail lounge 

business continually during that period of time, and 

had as of the termination of the lease on November 30, 

1973, an established business in Silver Bow County, 

with a good business reputation for good food and service 

and from which the court does conclude that such business 

would have enjoyed profitable success in the next five 

years of operation. 

"10. That the business records of the Plaintiffs establish 

by a preponderance of the evidence that by reason of 

Defendants' breach of the lease agreement Plaintiffs would 

have earned a net profit in the business of a period of 

five years from November 30, 1973, the sum of Twelve Thousand 

Dollars ($12,000.00) each year, which is determined after 

deducting from the expected gross revenue all business 

expenses, including taxes, wages, depreciation and a reasonable value of Plaintiffs' services. 

"11. That by reason of the conduct of business over a 

term of five years the Plaintiffs earned a good business 

reputation and established good will with the community, 

from which Plaintiffs could reasonably have enjoyed continued profitable operation by reason of its business location, reputation for good food and service, general atmosphere and repeated return of their customers. That by 

reason of the breach of the lease agreement by the Defendants, 

the Plaintiffs suffered damages by loss of good will in 
the reasonable sum of Five Thousand Dollars ($5,000.00). 

"12. That by reason of the breach of the lease agreement 

by Defendants, the Plaintiffs were forced to sell their 

business, equipment and inventory in piecemeal lots. That 

had Plaintiffs been able to sell such equipment as a going 

concern, the reasonable value of such equipment was the 

approximate sum of Twenty Five Thousand Dollars ($25,000.00) 

That by reason of the premature and forced sale of such 

equipment, Plaintiffs received .the sum of Nine Thousand 

Seven Hundred Eighteen and 60/100ths Dollars ($9,718.60). 

That by reason thereof the Plaintiffs suffered damages 

in the sale of said equipment in the sum of Fifteen Thousand 

Dollars ($15,000.00). 

"CONCLUSIONS OF LAW 

"I. That Plaintiffs have established by a preponderance of the evidence that the Defendants breached the 

lease agreement existing between the parties, and particularly Paragraph 5 thereof. 

"11. That by reason of the breach of such agreement, 

the Plaintiffs have established by a preponderance of 

the evidence that they suffered damages as follows: 

"C. Loss of value on Equipment ---------- $15,000.00 

"for total damages in the sum of Forty Five Thousand 

Dollars ($45,000.00) ." 

Defendant appeals and presents three issues for review: 

1. The court erred in overruling defendant's offer of proof 

to show the bids and the amount of rent for which the leased 

premises were let to plaintiffs' successor as tenant as being 

indicative of the reasonableness of the defendant's offer of a 

monthly rent of $865.00 to plaintiffs. 

2. The court erred in that its findings and judgment of 

breach of lease agreement and of refusal to negotiate a reasonable 

increase in rent by defendant are not supported by substantial, 

credible evidence. 

3. The court erred in that the damages awarded plaintiffs 

are excessive, improper and contrary to the evidence and the law. 
Lessor generallyargues the matter of the correct termination 

date did not arise during the term of the lease and there was no 

I I awareness" of this until August 31, 1973. That all matters 

until the defendant agreed to a November 30, 1973 termination 

date as correct on November 15, 1973, should be deemed acts in 

good faith. Lessor then simply says all negotiations after November 15, 1973, were good faith and reasonable attempts to set 

a new rental figure and discuss "(other * * * housekeeping details 

in removing obsolete provisions from the lease)". 

This logic simply ignores the facts in this case. The whole 

tenor of this situation as far as defendant was concerned after 

November 15, was merely that the notice was filed on time, so let 

us go forward as is and negotiate a new contract. Examples: (1) 

Plaintiffs' Exhibit No. 14, a letter from defendant to plaintiffs 

dated November 20, 1973, which states in essence---we recognize 

your November 30 date but we want $1,200 based in part on-offers 

from others and in addition to rent there must be other changes 

in the lease. (2) Exhibit A of defendant, a letter from defendant 

to plaintiffs dated December 11, 1973 in response to a request of 

plaintiffs for justification of the $1,200 rent figure: 

"The Board and the Commission are in agreement that 

no good purpose would be served by providing a detailed 

set of figures in support of this $1,200 monthly rental 

proposal. If necessary the Board and Commission will 

supply such figures and justification of the $1,2000 price 

in court". (Emphasis added.) 

This communication was signed by the three members of the 

board of county commissioners. On December 28, after numerous 

exchanges defendant reminded plaintiffs to be gone by the end of 

January, if no settlement was reached, and so on and on. 

These few examples demonstrate the problem, but the review 

of the entire record amply supports the trial court with credible 

and substantial evidence. 

-8- 
Damages have been attacked by defendant as self-imposed, beyond 

the contemplation of the parties when they entered into the lease 

in 1968, etc. However, the only proof of damages has been produced 

by the plaintiffs. Plaintiffs produced evidence of loss of 

profit for 5 years, loss of good will, and loss of market value 

of equipment at forced sale. 

In Laas v. Montana Highway Commission, 157 Mont. 121, 132, 

483 P.2d 699, this Court specifically held that under section 

17-301, R.C.M. 1947, which provides that the measure of damages 

in a breach of contract action is the amount that will compensate the party aggrieved for all the detriment proximately 

caused thereby or which in the ordinary cause of things would be 

likely to result therefrom, damages are recoverable for loss of 

profits : 

"'* * Jc the rule is that a person may recover for loss 

of profits where it is shown that such loss is the 

natural and direct result of the act of the defendant 

complained of and that such amount is certain and not 

speculative. * * * "Profits which are a mere matter of 

speculation cannot be the basis of recovery in suits 

for breach of contract, while profits which are reasonably certain may be ." "' 157 Mont. 132. 

From plaintiffs' testimony and plaintif fs' Exhibits 6 and 

17, the court found plaintiffs' could reasonab1.y in the next 5 

years expect a yearly profit of $12,000 per year (court's finding 

No. 10) yet the court awarded $5,000 per year which is well within 

the evidence. The same holds true for good will and the equipment. 

The equipment Exhibit was introduced without objection and demonstrates the trial court's award. 

In regard to the offer of proof as to justification of a 

higher rental, the foundation was absent to make the proposed 

evidence material or relevant to the considerations allowable 

under the contract which governs the method of arriving at a 
new rent figure and was therefore properly denied by the trial 

court. 

Finding no error and there is substantial credible evidence 

to support the judgment of the trial court, that judgment is 

affirmed. 

We Concur: 

..--- . - .--,-7 

Chief Justice