Opinion ID: 877417
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Heading: validity of lease agreement

Text: 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, 435 P.2d 883. (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, 288 P.2d 660. 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.