No. 80-205 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1981 

BRUCE A. KOSENA, d/b/a THE PUB, 

Plaintiff and Appellant, 

NORMAN E. ECK, TRUSTEE OF 

JOHN A. ECK, TRUST, 

Defendants and Respondents. 

Appeal from: District Court of the First Judicial District, 

In and for the County of Lewis & Clark, The 

Honorable H. William Coder, Judge presiding, 

Counsel of Record: 

For Appellant: 

Robert T. Cumrnins, Helena, Montana 

Charles A. Smith, Helena, Montana 

For Respondent: 

Jackson, Oitzinger & Pflurdo, Helena, Montana 

Filed: 

Submitted on Briefs: April 15, 1981 

Decided: October 29, 1951 

OCT 2 9 1981 
Mr. Justice Daniel J. Shea delivered the Opinion of the 

Court. 

Plaintiff appeals, and defendants cross-appeal, from 

a judgment entered in Lewis and Clark County District Court 

declaring the rights of the plaintiff as tenant and the 

defendants as landlords. 

The trial court ruled in favor of tenant that a valid 

lease agreement existed, that the rental due under the lease 

was $650 per month, and that landlords must pay tenant 

$5,000 as their share of the costs of repairs made by 

tenant. The trial court ruled in favor of landlords that 

tenant did not have a valid mechanics' lien for repairs 

which he had completed on the premises, and that the landlords were entitled to prejudgment interest on the rental 

payments. The trial court further ruled that both parties 

must bear their own costs and attorney fees. 

We affirm the first two rulings as to the existence 

of the lease agreement and the amount to be paid--$650 per 

month. We remand to the trial court for further findings as 

to the amount awarded to tenant to compensate him for 

repairs to the premises. We reverse the trial court's 

ruling that no mechanics' lien existed, the award of 

prejudgment interest, and the order that each side bear its 

own costs and attorney fees. 

On February 29, 1968, J. A. Eck and Marie A. Eck, the 

parents and predecessors of the landlords, leased a portion 

of a Helena business building to Reginald L. Brewer and 

William 0. Bahny. The other portion of this building, known 

as "Howard's Pizza," was expressly excepted from the lease 

agreement. The lease agreement had a primary term of five 

years with an option to renew for five additional years. It 
further provided for a rental rate of $275 per month, to be 

adjusted by any increase in taxes on the premises above the 

1967 taxes. The leased premises, known as "The Pub," was 

operated as a bar by Brewer and Bahny. The lease agreement 

required that an assignment of the lease be subject to the 

written consent of the landlords. On April 24, 1968, one of 

the original tenants, Bahny, sold his one-half interest in 

"The Pub" to Bruce A. Kosena, the tenant involved here. As 

part of this agreement the tenant obtained a written 

assignment of lease from Bahny, as well as a written consent 

to assignment of lease from the landlords. 

The tenant and Brewer continued to jointly operate 

"The Pub" until January 15, 1971, when Brewer sold his 

interest in "The Pub" to the tenant, and so the tenant 

became the sole proprietor and lessee. The written consent 

of the landlords was not obtained for this transaction. 

However, the tenant made the rent payments, and the 

landlords accepted the payments without objection. Sometime 

in 1972, that part of the building known as "Howard's Pizza" 

was taken over by the tenant and made a part of "The Pub." 

The tenant and landlords verbally agreed to make this 

additional area a part of the leased premises and to 

increase the rental to $500 per month. The tenant continued 

to operate "The Pub" without further problems until January 

1974, when the building was substantially destroyed by fire. 

The lease agreement contained a fire clause, which stated in 

part : 

"AND PROVIDED, ALSO that in case the building 

on said demised premises, or any part 

thereof, shall during said term be destroyed 

or damaged by fire or other unavoidable 

casualty, so that the same shall be unfit for 

use, then said rent or proportionate part 
thereof shall be abated until said premises 

shall have been put in proper repair by the 

Lessors, or this lease shall have been 

determined, at their election." 

After the fire, the tenant found other employment, 

and considered relocating his business. In June or July 

1974, approximately six months after the fire, not having 

found a place to relocate, the tenant discussed with the 

landlords the possibility of restoring the original 

building. The landlords elected to restore the building, 

and the tenant verbally agreed to restore or reinstall the 

things necessary to operate his business. The repairs were 

completed, and the tenant reopened "The Pub" in November 

1974. The parties had also verbally agreed that the rent 

remain at $500 per month in November and December 1974, but 

to be increased to $650 in January 1975. The tenant paid 

these amounts and the landlords accepted them as they became 

due. However, in early January 1975, the landlords advised 

tenant that, commencing in February 1975, the monthly rent 

would increase to $1,175. This started the dispute. 

The tenant refused to pay the $1,175 and filed a 

mechanics' lien against the premises in the amount of 

$74,000, allegedly to recover the labor and materials he had 

expended in restoring the premises after the fire. In 

February 1975, the tenant tendered a check for $650 which 

was refused by the landlords, who still demanded $1,175 per 

month. The tenant then filed a lawsuit to determine the 

existence and terms of the lease and to also foreclose on 

the mechanics' lien. The tenant continued to pay $650 per 

month into court and he obtained a temporary restraining 

order to prevent his eviction. 

Trial was held on February 16 and 17, 1978, and on 
April 26, 1978, the trial court issued an order from which 

this appeal is taken. 

Because one ruling depends on the other, we discuss 

the issues in the following order. First, the validity of 

the lease agreement; second, the legality of the landlords' 

demand increasing rent to $1,175 per month from $650; third, 

the award of interest to the landlords on each $650 payment 

the tenant has been voluntarily depositing in court since he 

filed the lawsuit; fourth, the validity of the mechanics' 

lien filed by the tenant; fifth, the award of $5,000 to the 

tenant as compensation for repairs; sixth and finally, the 

trial court's rulings on attorney fees. 

VALIDITY OF LEASE AGREEMENT 

The landlords contend that the trial court erred in 

not holding that the lease was terminated as a matter of 

law. This contention is based in part on section 

70-1-607(4), MCA, which states in part: "When hiring 

terminates. The hiring of a thing terminates: . . . (4) by 

the destruction of the thing hired." 

This statute provides, disjunctively, several ways by 

which hiring can terminate. However, the landlords urge 

that subsection (4) be applied exclusively to terminate the 

lease agreement. In Solich v. Hale (1967), 150 Mont. 358, 

435 P. 2d 883, interpreting the predecessor of section 70-1- 

607, MCA, this Court stated: 

"If it is found that the building is 

destroyed, by operation of law the lease 

would -be terminated. Only an agreement to 

the contrary between the two parties could 

prevent the action of this statute [section 

70-1-607, MCA] ." 150 Mont. at 361-362. 

(Emphasis added.) 
Here, the lease agreement does contain an express 

agreement to the contrary which precludes the operation of 

section 70-1-607, MCA. 

The landlords also contend that the original lease 

had been "so long abandoned, disregarded, and repudiated" 

that it was void and ineffective before the time of the 

fire. This contention is apparently based on the following 

allegations: 

(1) That the tenant failed to obtain the 

written consent to the assignment of lease 

from the landlords when the tenant bought out 

Brewer's one-half interest in "The Pub" on 

January 15, 1971. 

(2) That the parties, by verbally modifying 

the lease agreement, invalidated the entire 

lease. 

(3) Finally, that the tenant did not properly 

exercise his option to extend the lease term 

when the primary term expired in 1973. 

These contentions are supported neither by the law 

nor by the facts. In their brief, counsel for the landlords 

fails to cite any legal authority to support the theory that 

the written consent of the landlords is an absolute 

prerequisite to a valid assignment of the lease. In fact, 

the great weight of authority is to the contrary. First, a 

restriction imposed in a lease agreement against an 

assignment of the lease is a restraint against alienation 

and is not looked upon with favor by the courts. Such 

restrictions are to be construed strictly against the 

lessor. Gazlay v. Williams (6th Cir. 1906), 147 F. 678, 

aff 'd, 210 U.S. 41, 28 S.Ct. 687, 52 L.Ed. 950. Such terms 

must be given a limited effect. Here, the lease agreement, 

dated February 29, 1968, and signed by the predecessors of 

both the tenant and landlords, states as follows: 
"The Lessees agree not to sublease or assign 

all or any part of the demised premises 

during the term of this lease without first 

obtaining the written consent of the Lessors 

thereto." (See page 5 of lease agreement.) 

In April 1968, the predecessors of the landlords 

consented in writing to Bahny's assignment of his interest 

in the lease to the tenant. The landlords' argument, 

however, centers on the later departure of the tenant's 

co-lessee, Brewer, on January 15, 1971, when the tenant took 

over the sole operation of the leased premises. 

The tenant had no legal duty to obtain the landlords' 

written consent to his agreement with Brewer. The narrow 

interpretation demanded of such restrictions prohibits the 

application of the provision to a subsequent assignment. 

Lipsker v. Billings Boot Shop (1955), 129 Mont. 420, 288 

P.2d 660. In Lipsker, this Court declared that, "The 

landlord's consent to the [original] assignment of a lease 

obviates the necessity of consent to subsequent assignments." 129 Mont. at 427. 

The record also reveals that the landlords knew that 

the tenant had become the sole proprietor and lessee long 

before this dispute arose. And, the landlords continued to 

receive rental payments from the tenant for at least four 

years and never objected to the assignment. The landlords 

have long waived any right to assert breach of the 

restriction. Crossman v. Fontainbleau Hotel Corp. (5th Cir. 

1959), 273 F.2d 720. 

The landlords' counsel has also ignored section 

28-2-1602, MCA, which expressly sanctions verbal modification of written contracts, including, of course, a written 

lease. Rodgers v. Saunders (1964), 144 Mont. 424, 396 P.2d 
817. Here, the executed verbal agreements to increase the 

rental payments and to expand the leased premises, modified 

the lease agreement. 

Finally, we hold that the tenant validly exercised 

his option to renew the lease when the original term expired 

in 1973. The agreement does not require that such an option 

must be exercised by written notice to the landlords. The 

option may be exercised verbally or even by conduct of the 

parties which exhibits a clear intent to exercise the 

option, Flint v. Mincoff (1960), 137 Mont. 549, 353 P.2d 

340, a question of fact to be determined by all of the 

circumstances. Fun Products Distributors, Inc. v. Martens 

(Alaska 1977), 559 P.2d 1054. Here, the trial court 

correctly ruled that the tenant effectively exercised his 

option to renew. Considering the substantial amount of 

labor and materials provided by the tenant after the fire, 

all with the knowledge and consent of the landlords, it 

would be ludicrous to infer that the parties believed that 

the primary lease term had expired and that tenant had 

become only a month-to-month tenant. The tenant clearly 

demonstrated his intent to exercise the option. 

We hold, therefore, that the original lease agreement 

of February 1968 was still valid and in effect at all times 

relevant to this case, until the expiration of the option 

term in 1978, subject to the verbal modifications made by 

the parties. 

THE LANDLORDS' DEMAND FOR $1,175 PER MONTH RENTAL 

Our decision declaring that the lease agreement was 

valid and effective disposes also the landlords' demand that 
the rent be increased to $1,175 per month. The tenant at no 

time consented to raise the monthly rental beyond $650, and 

therefore the landlords had no right to increase the rent to 

$1,175 per month. The terms of the lease, as modified by 

the parties, had set the rental payments at $650 per month. 

TRIAL COURT'S AWARD OF INTEREST 

The trial court awarded the landlords interest on the 

rental payments "at the rate of 6 percent per annum from the 

due date of each payment as rent on the premises." Essentially, the trial court determined that interest should 

accrue as of the time that each rental payment became due. 

The record clearly shows that in February 1975, the 

landlords refused to accept the $650 monthly rent payment 

tendered by the tenant. The tenant then filed a lawsuit and 

tendered the $650 monthly payments into court. He had no 

other choice, as the landlords prevented him from paying his 

debt as it came due. Section 27-1-211, MCA, clearly 

releases the tenant from any obligation to pay interest: 

"27-1-211. Right to interest. Every person 

who is entitled to recover damages certain or 

capable of being made certain by calculation 

and the right to recover which is vested in 

him upon a particular day is entitled also to 

recover interest thereon from that day except 

during such time as prevented 

- by ------ law or by the act of the creditor from 

paying the debt." (Emphasis added.) 

Because the landlords were entitled to no more than 

$650 per month, it was their own refusal to accept the 

tendered payment, which resulted in the tenant filing a 

lawsuit and prevented them from receiving each payment as it 

became due. By any standards, the conduct of the landlords 

prevented the tenant from making the required payments. The 
tenant should not be penalized for attempting to comply with 

the terms of the lease agreement, nor should the landlords 

be rewarded for unjustifiably refusing to accept the 

payments. The order allowing interest is reversed. 

THE VALIDITY OF PLAINTIFF'S MECHANICS' LIEN 

Upon their election to repair, the landlords became 

bound under the lease agreement to make such repairs as 

necessary to provide the tenant with suitable premises to 

operate his business. The landlords willfully abrogated 

their duty under this contract when they refused to complete 

the repairs. This refusal compelled the tenant to complete 

the repairs himself, and he did so with the knowledge and 

consent of the landlords. These facts establish an implied 

contract between the parties. An implied contract is 

sufficient to support a valid mechanics' lien. M & R Const. 

Co. v. Shea (1979), - Mont . , 589 P.2d 138, 36 St.Rep. 

37. (See also cases cited therein.) This Court has noted 

that a mechanics' lien ". . . is a creature of statute, 

remedial in nature, with its foundation in equity and 

natural justice, not contract." Beck v. Hanson (1978), - 

Mont. , 589 P.2d 141, 144. The equities were clearly in 

favor of the tenant. 

The landlords willfully breached their promise to 

repair, and they were fully aware that the tenant was then 

compelled to complete the work. After the tenant had 

completed the repairs, the landlords then attempted, 

contrary to the terms of the lease, to drastically increase 

the rental payments. That can hardly be classified as fair 

dealing. 
In denying the mechanics' lien, however, the trial 

court relied on a clause in the lease which required the 

tenant to "pay and discharge" any liens filed against the 

premises. That clause required the tenant: 

"1. To pay and discharge promptly, all liens 

and obligations of any nature and kind 

whatsoever which may attach to or be imposed 

upon said premises, or to said leasehold, 

created or incurred by said Lessees, to pay 

all reasonable costs, attorney's fee and 

expenses that shall be made and-occurred by 

the Lessors in enforcing the covenants of the 

agreements in this lease." (Emphasis added.) 

The clear intent of this clause is to prohibit the 

tenant from having work done which would result in a lien 

filed against the premises, or to pay the liens if filed. 

But here it was the landlords who initiated the repairs. 

The landlords, by electing to repair the premises after the 

fire, "created or incurred" the obligation to complete such 

repairs. The tenant was compelled to do the work when the 

landlords failed to complete it after electing to repair the 

premises under the fire clause in the lease. 

The trial court also noted several alleged technical 

defects in the mechanics' lien. Specifically, the trial 

court referred to the fact that the lien was filed by "Bruce 

A. Kosena" whereas this action was filed by "Bruce A. 

Kosena, d/b/a The Pub." This is an inconsequential 

technical discrepancy, and it will not invalidate an 

otherwise valid lien. The lien statute must be interpreted 

liberally to protect the right of the lien. Morrison-Maierle 

Inc. v. Selsco (1980), - Mont. , 606 P.2d 1085, 37 

St.Rep. 299; Fausett v. Blanchard (1969), 154 Mont. 301, 463 

P.2d 319. Furthermore, the fact that some of the items 

claimed in the lien may not be lienable does not invalidate 
the entire lien. Smith v. Gunniss (1944), 115 Mont. 362, 

144 P.2d 186; Caird Engineering Works v. Seven-Up Gold 

Mining Co. (1940), 111 Mont. 471, 111 P.2d 267. 

The landlords' conduct throughout this transaction is 

inexcusable. Their willful breach of an obligation to 

repair the premises, and their ratification of the 

significant repairs made by the tenant, is alone a 

sufficient legal basis for the filing of a mechanics' lien. 

Further, their totally unjustified demand for drastically 

increased rental payments after the completion of the 

repairs presents an even stronger equitable basis to uphold 

the lien. The tenant is entitled to a mechanics' lien in 

the full amount of the value of any permanent repairs that 

were the duty of the landlords to provide. 

TRIAL COURT AWARD OF $5,000 TO TENANT AS COMPENSATION FOR 

REPAIRS 

The trial court ordered the landlords to pay a sum of 

$5,000 to compensate the tenant for repairs that he made to 

restore the premises af ter the fire. The trial court 

arrived at this figure in a mysterious way. The trial court 

listed items which were installed by the tenant and which 

were of benefit both to the tenant and the landlords. The 

court valued these items at $10,000, and then determined 

that the parties should "share equally" the cost of these 

items. But no basis exists in the record for the trial 

court's valuation of the items at $10,000, or for the 

determination that this cost should be shared equally by the 

parties. We reverse this part of the court's judgment and 

remand for further findings as to the exact value of the 

repairs for which the tenant may recover. 
Absent an agreement to the contrary, the common law 

rule is that the lessor has no duty to repair. Solich, 

supra. Here there is an agreement to repair contained in 

the lease agreement, and when the landlords elected to 

repair and restore the premises, they became bound by this 

agreement to make the repairs necessary to restore the 

premises to a tenantable condition. The landlords failed to 

do this, and the tenant was compelled to complete the work. 

Under the agreement, the landlords are liable for the costs 

incurred by the tenant in completing the repairs that were 

the landlords' duty to provide. 

THE TENANT IS ENTITLED TO ATTORNEY FEES INCURRED IN 

ENFORCING THE LEASF AGEEE?IZ1JT AiJD ATTORNEYS FZES ' 

FORECLOSING THE MECHANICS LIEN 

In its original findings of fact and conclusions of 

law, the trial court held that (1) the tenant was entitled 

43 

to attorney fees pursuant to section .83-8601.1, R.C.M. 1947, 

for enforcing the covenants of the lease, and (2) that the 

landlords were entitled, under section 93-8614, R.C.M. 1947 

(now section 71-3-124, MCA), to recover reasonable costs of 

defending against the mechanics' lien pursuant to section 

93-8614, R.C.M. 1947. But later, the trial court ordered 

that each party bear its own costs and attorney fees. We 

reverse this order. 

The tenant is entitled to the reasonable costs of 

attorney fees incurred in establishing the validity of his 

lease. By demanding, unjustifiably, a drastically increased 

rental payment from the tenant and by taking leqal action to 

force the tenant to quit the premises, the landlords refused 

to recognize the existence of the lease. The tenant was 
forced to sue to determine the validity of the lease, and 

section 28-3-704, MCA, provides that the tenant is entitled 

to attorney fees so incurred. 

Because the original lease agreement was entered into 

before the "effective date" (July 1, 1971) of section 

28-3-704, MCA, counsel for the landlords contends that this 

statute does not apply here. Undoubtedly confusion exists 

as to the "effective date" provision. See Belgrade State 

Bank v. Swainson (1978), 176 Mont. 444, 578 P.2d 1166; 

Belgrade State Bank v. Swainson (1977), 172 Mont. 350, 564 

P.2d 174. But we need not reconsider that issue here. The 

date of the agreement at issue is the date on which the 

lease agreement was renewed, March 3, 1973. The statute was 

then in effect. Because the landlords have asserted that 

the tenant did not properly exercise his option to renew the 

lease, the tenant was forced to sue to establish the 

validity of his option. Section 28-3-704, MCA, applies. We 

have previously rejected the landlords' argument that this 

statute does not apply to a party who started the lawsuit. 

Compton v. Alcorn (1976), 171 Mont. 230, 235, 557 P.2d 292. 

Because we have ruled that the tenant had a valid 

mechanics' lien, the landlords are not entitled to attorney 

fees for defeating a mechanics' lien. Rather, the tenant is 

entitled to attorney fees for the costs incurred in 

establishing the validity of the mechanics' lien. See 

section 71-3-124, MCA. 

The record does not establish the exact amount of 

attorney fees incurred by the tenant and therefore we must 

remand for further proceedings to establish the proper 

amount. The tenant is entitled to recover the reasonable 
attorney fees incurred in establishing the validity of the 

lease and in foreclosing on his mechanics' lien. This 

includes also the attorney fees incurred in presenting this 

appeal. 

The District Court judgment is af firmed in part, 

reversed in part, and remanded for further proceedings. 

We concur: 

?ha& ,). %- 

Chief '3ustice