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. Jusrice Frank 8. Morrison, Jr., delivered the Opinion of 

the Court. 

Nichael and Joan Lemley appeal the February 5, 1982, 

judgment of the District Court of the Eighteenth Judicial 

District adopting the landlord, Bozeman Community Hotel 

Company's interpretation of the rent clause of a November 

29, 1976, assigned lease between the parties. We affirm the 

judgment of the District Court. 

On May 19, 1975, Paul Carter, President of RX Enterprises, Inc., entered into a lease with respondents for 

premises in the "Baxter Hotel," Bozeman, Montana. The lease 

was for the period from January 11, 1976 to January 10, 

1961. With respondent landlord's permission, Paul Carter 

assigned his lease to Michael and Joan Lemley on November 

The lease contains a clause allowing for its renewal 

for two additional five-year consecutive terms. That clause 

states: 

"19. That upon the expiration of the 

primary term of this Lease and Agreement, 

that is to say from January 11, 1976, 

through and including January 10, 1981, 

Tenant is granted the option to lease 

these premises for two (2) additional 

five (5) year consecutive terms with the 

same terms and conditions as hereinabove 

set forth for each of the five (5) year 

consecutive periods, with the exception 

that the amount of minimum base rental in 

the sum of Four Hundred Dollars ($400.00) 

as set forth nereinabove, shall at the 

expiration of the first five (5) year 

lease period be changed as follows: 

"(a) The sum of the base rental shall be 

changed to reflect the increase or decrease in the cost of living index occurring during the first five (5) years for 

the term of this Lease and Agreement 

shall either increase or decrease the 

amount of base rental to be paid (in the 

sum of $400.60 per month) by the same 

percentage which the consumer price index 
has risen or fallen during the first five 

(5 j years of this lease. 

"'l'he 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 decrease 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 Percentage of Increase or 

Rental Derived x Decrease Cost of Property 

From (a) Taxes and Utilities 

Mr. Lemley disagreed. He argued that although formula 

(b) above correctly reflects the language of the formula set 

forth in Clause 19(b), the language of the formula is not 

consistent with the stated intent of Clause 19(b). The 

intent is found in the first sentence of Clause 19(b), "to 

reflect the yearly increase or decrease in the cost to Landlord of property taxes and utilities." 

On February 26, 1981, Lemley filed a complaint in the 

Eighteenth Judicial District Court requesting, among other 

things, a declaratory judgment construing the terms of the 

lease. As an alternative and in keeping with Lemley's 

perceived intent of the clause, he suggested tnat the 

percentage increase be added to the new base rent rather 

than be multiplied by it. He presented no formula by which 

to accomplish that result. 

Lemley presented two other causes of action in his 

complaint. He requested credit for utilities paid by him 

contrary to the terms of the lease and compensation by 

Bozeman Community Hotel for loss of income suffered when the 

landlord unreasonably denied Lemley's requests to sublet the 

premises. 

A hearing was held October 19, 1981, following which 

the District Court issued a judgment February 5, 1982, 

ordering: 

1. That landlord recover from Lemley, "the sum of 

$3,908.01, being the sum of $1,257.60 per month for rent 

from January, 1981, through October, 1981, for a total 

rental of $12,576.00, less the surn of $7,220.00 as paid 
through date of October, 1981, and less the sum of $1,477.99 

for electrical bills paid by Plaintiffs." 

2. That Lemleys pay to landlord "the sum of $1,257.60 

per month from November 11, 1982 and on the 11th day of each 

month thereafter, for the remaining term of the Lease of the 

premises in the baxter Hotel, referred to as the i3axter 

Pharmacy, through January 9, 1986." 

3. That Lemley's claim for damages caused by landlord's failure to consent to several proposed subletters be 

dismissed. 

4. That attorney fees and costs totaling $3,263.00 be 

awarded landlord. 

In appealing the judgment, Lemley presents the following issues for our review: 

1. What is the proper interpretation of Clause 19 of 

the iease and agreement? 

2. Did the District Court properly determine the 

amount of rent owing and to be paid? 

3. Was landlord's denial of consent to sublease 

unreasonable? 

4. Was Lemley entitled to recover attorney fees 

incurred with regard to his claim for credit for the payment 

of the electrical bills? 

We affirm the decision of the District Court in all 

respects. 

The District Court properly interpreted Clause 19 of 

the lease. Courts have no authority to change a contract 

when its intent is clear. Williams v. Insurance Company of 

North America (1967), 150 Mont. 292, 295, 434 P.2d 395, 397. 

Courts do interpret contracts when an ambiguity exists. An 
ambiguity exists "wnen the contract taken as a whole in its 

wording or phraseology is reasonably subject to two different interpretations." Williams v. Insurance Company of 

North America, supra. 

No ambiguity exists in Clause 19(b). The first 

sentence states the intent of the clause. The formula 

following dictates how the intent shall be accomplished. 

Taken as a whole, the contract is reasonably subject to only 

one interpretation. 

The formula is clear and express. Courts may not 

disregard the express language of a contract. Williams v. 

Insurance Company of North America, supra. 'I'herefore, the 

District Court properly adopted the formula for rent 

increase stated within Clause 19. 

Lemley further complains that he requested only a 

declaratory judgment construing the terms of the lease, not 

a court determination of the rent amount owed pursuant to 

the lease. At trial, Bozeman Community Hotel introduced 

many exhibits concerning the cost of living index from 1976 

to 1981 and the hotel's property tax and utility expenditures from 1975 to 1980. It then presented the following 

chart applying the figures derived from the other exhibits 

to the formulas set forth in Clause 19: 

(a) Amount of Base Percentage of Increase or 

Rent x Decrease Cost of Living Index 

Amount of aase Cost of Living January 1981 

Rent x Cost of Living January 1976 

(b) Amount of Monthy Percentage of Increase or 

Rental Derived x Decrease Cost of Property 

From (a) Taxes and Utilities 
Amount ot Monthly Cost of Property -Taxes and 

Rental Derived x Utilities 1980 

From (a) Cost of Property Taxes and 

Utilities 1975 

No objections were made to the admission of those exhibits. 

Lemley did request only a declaratory judgment in his 

complaint. However, by failing to object to the admittance 

of the above evidence used by the court to determine the 

proper rent amount, he impliedly consented to the rent 

amount being determined by the court. Rule 15(b), 

1ul.K.Civ.P.; Reilly v. Maw (1965), 146 Mont. 145, 155, 405 

P.2d 440, 446. Therefore, we affirm the District Court's 

determination of the amount of rent owing and to be paid. 

The court acted within the scope of the pleadings, as 

amended. 

Clause 9 of the lease in question requires landlord 

consent prior to the subletting of the premises. It also 

requires that landlord not unreasonably withhold such 

consent. Lemley provided the court with the following 

information concerning his attempts to sublease the 

premises. 

With landlord's approval, Cactus Records sublet the 

basement of Lemley's pharmacy. Lemley later approached 

landlord in January 1978 regarding Cactus Records subletting 

the main floor also. Landlord disapproved as he was wary of 

Cactus Records' business practices. Lemley next approached 

landlord regarding King-Gallatin expanding the Point After 

a into the main floor space. Landlord disapproved as 

there were already two bars in the Hotel and he 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 landlord 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 constructed 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 submitted 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: 

7L-U%,va~q Chief Justice