Court Opinion

ID: 9541896
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:29:26.587419+00
Date Added: 2024-06-11T15:05:08.754991
License: Public Domain

BISTLINE, Acting Judge.
HISTORY
In 1978, defendants Robert Whitacre and Michael Groth became interested in building a skating facility in Idaho Falls. Therefore, they formed the defendant corporation, Country Club Sports, Inc., for the purpose of acquiring financing for this project. Their search for financing led them, in the summer of 1980, to Gary Olsen, the plaintiff in the action.
After discussing the project, Olsen, Whit-acre, and Groth agreed to the following: Olsen would finance the construction of an ice skating facility and then lease it for a fifteen-year term to Country Club. On June 18, 1980 the parties entered into this lease. At the same time Whitacre and Groth individually guaranteed the obligations under the lease in which Country Club had entered.
Olsen spent approximately $465,000 to finance construction of the facility. As part of the provisions under the lease, Country Club furnished $100,000 in ice skating equipment. The corporation also supplied $35,000 in building materials.
From day one the ice skating facility has, apparently, been an unsuccessful venture, and, by February 1981, Country Club was in arrearage in rent in the amount of $106,-000. On February 24, 1981 the parties formally acknowledged that Country Club was in default of the original lease and renegotiated terms, effective February 1, 1981. Things fared no better, however, and by April 1981 Country Club was again in arrearage on rent payments in the amount of $36,565.11. Accordingly, on April 24, 1981, Olsen served Country Club, Whitacre, and Groth with a Notice of Breach of Lease Agreement. Therein Olsen demanded payment of all rent then due within five days of receipt of the notice; referred to that provision of the Lease Agreement that if rent arrearages were not paid within the five days such would constitute a default; declared a default for the non-payment; and, of great importance, concluded with the following:
8. Exercise of Rights on Default.
Gary Olsen as lessor under the lease agreement hereby exercises his option to terminate and forfeit the lease immediately upon such default. Gary Olsen hereby exercises his right to immediately re-enter the leased premises upon the occurrence of a default and shall thereupon immediately assume possession and control of the leased property. Gary Olsen as lessor hereby elects to immediately accelerate all rent under both the lease agreement and the supplement agreement to become due after default so that it shall then be due and payable. Upon such default, lessor also elects to take possession of the personal property subject to the security interest given in paragraph IVB of the lease agreement pursuant to Idaho Code Section 28-9-503. Gary Olsen as lessor will then proceed to sell the personal property subject to the security interest under such terms and conditions as are required by the lease and by the Idaho Uniform Commercial Code. Also, Gary Olsen as lessor shall seek to re-lease the premises and otherwise mitigate damages and will proceed to enforce collection of the total amount of rent then due under the terms of the lease agreement. Plaintiffs Exhibit 5 (emphasis added).
Country Club failed to pay the rent due. Thereafter, on May 19, 1981, Olsen’s counsel sent a letter to counsel for the defendants. In the letter, Olsen’s attorney stated the following:
It is our understanding Country Club Sports, Inc., Robert F. Whitacre, Jr., Robert F. Whitacre, Sr., and Mike Groth are not able to meet current commitments to keep the Idaho Falls Ice Arena open. On April 25, 1980 a notice of *792breach of lease agreement was served upon your clients. The defaults mentioned in that notice have not been corrected.
In order to mitigate damages, we request your clients immediately surrender possession of the Idaho Falls Ice Arena. We would like to effect the transition today. Gary Olsen will assume possession of the Idaho Falls Ice Arena, will pay for power to be delivered in the future, will retain the current staff, at least temporarily, and will otherwise take such action as is necessary to keep the facility open through approximately June 15. It is his intention to have the ice arena operate throughout the duration of the scheduled figure skating classes. He anticipates closing the ice arena approximately June 15. It will remain closed through the remainder of the summer and will open again approximately September 1.
During the summer, he anticipates installing a second compressor, making repairs, and contracting for management of the facility. Although he would like to permit your clients to re-establish their position as lessees, he cannot make a long term commitment to do that without seriously affecting his ability to obtain a full time manager. It would be difficult, if not impossible, to obtain a full time manager if his employment could be affected at any time by your clients deciding to resume their position as lessee.
Gary Olsen is only willing to permit your clients to re-establish their position as lessee at times prior to August 29, 1981.
In order to re-establish their position as lessee, your clients would have to pay all sums now due under the lease or that might become due under the lease as if it were continuing to be performed through August 28, 1981. In addition, they would need to pay Gary Olsen for all his costs and expenses, capital or otherwise, incurred by him between now and August 28 in the operation, repairs, maintenance, refurbishing or expansion of the facility, less any receipts received.
... Please do not infer the request to surrender possession nor the granting of a limited right for your clients to reinstate their position as lessee are a waiver of any right by Gary Olsen. He is waiving no right he may have against your clients. He is only trying to mitigate damages and grant a new right-the right of reinstatement exercisable prior to August 29, 1981. Gary Olsen, may and probably will seek recovery of damages because of the present defaults. If your clients fully reinstate their position as lessee, my client may at that time consider it in his best interests to discontinue any then pending suits.
We would like possession surrendered today and as orderly a transition as possible. If possession has not been surrendered by 5:00 p.m. today, we will proceed to obtain possession by judicial determination. We hope that additional expense will not be necessary.
R., Vol. 3, pp. 91-92 (emphasis added).
The defendants complied with this letter, and Olsen took possession of the skating facility. Olsen did no better in getting the ice skating facility to turn a profit, and ultimately shut it down in June 1982. He was, however, able to account back to the defendants, in mitigation of damages, $64,-101.84 from sale of the liened personal property. On December 1, 1982 this suit was filed, with Olsen seeking damages for rent due upon default, which included that rent which was accelerated pursuant to the provisions of the lease plus all unpaid rent, less that which he was able to offset plus expenses saved, the amount sued for being in excess of one million dollars.
Both parties filed motions for summary judgment, and on February 28, 1984 the district court (1) ruled against the defendants’ affirmative defenses of unconsciona-*793bility and improper mitigation of damages; and (2) ruled that the defendants surrendered the leasehold, and that this surrender eliminated all obligations and damages arising after the surrender. The court, however, reserved for trial the issues of when the surrender occurred and what offsets should be allowed to reduce Olsen’s claim of damages against the defendants.
A trial was held before the district court without a jury. The court determined the date of surrender to be August 29, 1981, and, accordingly, calculated damages to be $77,607.72, which included unpaid rent, interest, costs, and attorney’s fees1 that had accrued up to the surrender date. Both parties have appealed the trial court’s rulings.
I.
Before addressing the substantive issues of this case, it is necessary to restate the proper standard of review. In particular, we address the review we have undertaken with respect to the parties’ motions for summary judgment, and the district court’s findings in resolving the issues.
A.
As our Supreme Court has declared, a summary judgment is only to be granted when all the facts contained in all the applicable pleadings, depositions, admissions, and affidavits have been construed most favorably to the nonmoving party, and it is clear that there is no genuine issue as to any material fact. Crowley v. Lafayette Life Ins. Co., 106 Idaho 818, 821, 683 P.2d 854, 857 (1984). Further, summary judgments should be invoked with caution. Steele v. Nagel, 89 Idaho 522, 528, 406 P.2d 805, 808 (1965).
Where both parties file motions for summary judgment based on the same eviden-tiary facts and'on the same theories and issues, the case is proper for resolution upon the merits. Riverside Development Co. v. Ritchie, 103 Idaho 515, 518-19, 650 P.2d 657, 660-61 (1982).
B.
Cases are legion which hold that whether there has been a surrender by operation of law — the main issue before us — depends upon the parties’ intent, as manifested by their words and acts. See 51C C.J.S. Landlord & Tenant, § 126, p. 407 and cases cited therein; 49 Am.Jur.2d Landlord & Tenant, § 1100, p. 1055 and cases cited therein. This determination is necessarily a factual one. 51C C.J.S. supra at 407.2 Accordingly, on appellate review the appellant must persuade us that the district court findings are clearly erroneous. Rule 52, I.R.C.P. With that appropriate standard of review kept in mind, we turn to the issue of surrender.
II.A.
A surrender of a lease is the yielding up of a tenancy to the lessor before the end of the tenancy called for in the applicable lease. A surrender occurs and the tenancy is submerged and extinguished either by agreement or by operation of law. 49 Am.Jur.2d Landlord and Tenant § 1094, p. 1051.
As a result of a surrender, all rights and responsibilities which would otherwise *794accrue after the date of surrender under the lease are extinguished. Thus, for example, when a surrender, occurs, the lessee need not pay any rent which has not accrued as of the date of the surrender. See, e.g., Ehlert v. Woods, supra at 223, 63 P.2d at 1001.
We have underscored the words “tenancy” and “leasehold” to emphasize that it is the lease agreement and all rights and responsibilities flowing from it which are surrendered. This is to be contrasted with the tenant’s mere abandonment and the lessor’s re-entering — the point being that mere re-entering does not necessarily constitute acceptance of a lessee’s tendered surrender.
As mentioned above, a surrender occurs by mutual agreement or operation of law. It is undisputed that here there was no mutual agreement of surrender. Accordingly, the defendants had the burden of establishing to the satisfaction of the trial court that the conduct of the parties, in this case particularly that of Olsen, was such that as a matter of law a surrender of the lease has indeed taken place. 49 AmJur. supra at § 1095, p. 1052. The focus of the inquiry on the lessor’s conduct and words is to ascertain whether or not such are inconsistent with the continuation of the tenancy. If so, there may be a surrender as a matter of law, notwithstanding that the lessor may have actually intended the contrary. Surrender of a lease as a matter of law is not unlike the principle of quasi-contract wherein a court is not concerned with the intent or agreement of the parties. See Continental Forest Products, Inc. v. Chandler Supply Co., 95 Idaho 739, 518 P.2d 1201 (1974). Our review of the district court decision is simply to discern whether the facts support its conclusion that the lease was surrendered.
The trial court correctly noted that where a lessee has breached a lease before expiration of the lease’s term has occurred, the lessor, at common law, had three remedies: (1) treating the lease as terminated and resuming possession; (2) retaking possession of the premises for the benefit of the lessee, and holding the lessee liable for the difference in rent between what he or she in good faith was able to recover by reletting the premises and what was due under the lease; and (3) doing nothing and collecting the full rent due under the lease. Centurian Development Ltd. v. Kenford Co., 60 A.D.2d 96, 400 N.Y.S.2d 263 (1977).
The trial court also correctly noted that the third option is no longer as viable as in former times, at least in some contexts. In Industrial Leasing Corp. v. Thomason, 96 Idaho 574, 532 P.2d 916 (1974), our Supreme Court provided us with the guidance of this holding:
We therefore hold that the lessor of personal property is not unconditionally entitled to the full amount of the rentals reserved in the lease as damages in the event of breach of the lease. If the leased property is of such a kind that the lessor may reasonably anticipate the existence of a market for its re-lease or sale, the lessor is under a duty to use “commercially reasonable” efforts to release or sell the property to mitigate damages according to the following rules:
1. If the lessee notifies the lessor of his intention not to continue the lease, or if the lessor becomes aware of the lessee’s intention not to perform the lease by breach or otherwise, and if the leased property is returned to the lessor or made available to the lessor, then the lessor is under a duty to attempt to mitigate the damages sustained by the lessee’s breach by re-leasing or selling the property and setting off the amount received against the damages sustained by reason of the lessee’s breach of the lease. If a good faith attempt to rent or sell the property proves fruitless, the lessor is entitled to his full rental payment, plus expenses reasonably incurred in attempting to re-lease or sell the prop*795erty less expenses of performance saved by the breach (e.g., costs of maintenance, insurance, etc.). If the property is released in good faith (i.e., at a rate or price which is commercially reasonable under the circumstances of the case), the lessor’s damages are the rental called for in the breached lease, together with the reasonable expenses of preserving the property and re-leasing it, less the amount received in mitigation by the release and any expenses of performance saved by the breach of the lease. See Bennett v. Associated Food Stores, Inc., 118 Ga.App. 711, 165 S.E.2d 581 (1968); see also, Uniform Commercial Code— Sales, Part 7, Remedies, I.C. §§ 28-2-701 to 28-2-710, for treatment of the analogous problem under the law of sales.
Id. at 577, 532 P.2d at 919 (footnote omitted) (emphasis added).3
Thus, in determining whether Olsen’s conduct or words were inconsistent with a continuation of the lease, it is clear that mere entering and reletting may not in and of itself constitute an act inconsistent with the lease, nor be characterized as an act on the lessor’s part demonstrating an intent that there be a surrender of the lease; it would be anomalous to flatly hold that such acts are inconsistent with the lease when they may be required by law.
B.
Our review of the record convinces us that the district court’s conclusion that the lease was surrendered is sustained by the evidence. In addition to re-entering the premises, and not re-letting, Olsen took control of the business which had been theretofore operated by the lessees. Olsen stated several times in his letter of May 19, 1982 — when he declared the lessees to be in default — that the lessees could only “re-establish their position as lessee” if they would pay up the amounts due. We are aware that the “surrender” demanded was of possession. But, allowing the lessees to “re-establish” their position as lessees carries with it the connotation that until such re-establishment was offered and accepted, they were not lessees in the interim. The record is clear, too, that the lessees never were re-established as lessees. The reasonable conclusion to be drawn, then, from Olsen’s May 19 letter is that Olsen was there doing that which he threatened to do in his April 24 notice of breach — terminating and forfeiting the lease.4 Terminating a lease by the party entitled to do so is the equivalent of accepting the lessees’ surrender of the lease. The surrender requested was not of the lease, but of possession. The surrender was by operation of law. Tenant was told to move out, did, and lessor went in — not to re-lease — but to take over the premises and business as well.
III.
The second issue we confront is whether the district court was correct in *796determining August 29, 1981 as the surrender date. The defendants-lessees contend that the correct date should be May 19, 1981 — the day of Olsen’s default letter and the day he assumed operation of the lessee’s business. We are persuaded to that view. As pointed out above, see part II, B., supra, on May 19, 1981, Olsen declared the lessees to be in default. He requested the lessees to “surrender” possession and stated that they could only “re-establish” their position as lessees if the overdue rent was paid. These acts provided sufficient manifestation of Olsen’s intent by which the district court could properly conclude that the lease was forfeited, and thereby terminated — in which the lessees acquiesced in exiting the premises forthwith. We are inexorably brought to the conclusion that the surrender occurred on May 19.
The district court was influenced by Olsen’s statement that he might afford the defendants the opportunity to re-establish themselves as lessees if they paid the overdue rent by August 29,1981. That is irreconcilable, however, with the following: First, as of May 19, 1981 the defendants were no longer in the position of lessees. Olsen did not state that he was entering the leased premises as the lessees’ agent, or that in such a capacity he purportedly would usurp the operation of defendants’ business. Nor did he claim any right to do so. At best, the lessees were out on May 19, and, although given the opportunity, they were not obliged to come back in and revive tenancy. Nor was there an unequivocal statement on Olsen’s part that he would be obligated to reinstate the lease.
Second, an August 29, 1981 surrender date does not square with Olsen’s May 19 request that the defendants “surrender” possession of the property. The defendants did so; we see nothing evidencing a surrender as of August 29, 1981, which date was merely an arbitrary selection of Olsen as to the final date beyond which he would not consider a reinstatement of the lease. Accordingly, we hold that the district court erred, and as a matter of law the surrender of the lease took place on the 19th of May, 1981.
IV.
A third issue is whether the district court properly reduced damages owing to Olsen by various amounts either received by Olsen from operation of the property or contributed by the defendants in the building of the ice skating facility. On this issue we affirm the district court.
The defendants argue that the district court improperly refused to grant them credit for $35,000 in construction materials contributed to the ice skating facility. They also argue that the value ensuing from their maintaining in good condition $100,000 worth of equipment used at the facility should have also been used to offset the damages for which they are responsible. Both these arguments are based upon the doctrine of unjust enrichment.
Unjust enrichment is an equitable remedy. It is rooted in the theory that where a defendant has received a benefit which would be inequitable to retain, at least without compensating the plaintiff to the extent that retention is unjust, compensation will be ordered. Hertz v. Fiscus, 98 Idaho 456, 457, 567 P.2d 1, 2 (1977).
In Knauss v. Hale, 64 Idaho 218, 222, 131 P.2d 292, 295-96 (1942), our Supreme Court recognized the common law rule that a lessee, in the absence of an agreement, could not recover from the lessor for improvements made to the leasehold. Since Knauss, however, the doctrine of unjust enrichment has been recognized as an equitable exception to the common law rule set forth in Knauss. See Hertz, supra; Bair v. Barron, 97 Idaho 26, 539 P.2d 578 (1975); Nielson v. Davis, 96 Idaho 314, 528 P.2d 196 (1974); Haskin v. Glass, 102 Idaho 785, 640 P.2d 1186 (Ct.App.1982). Accordingly, we turn to defendants’ arguments that Olsen has been unjustly enriched by various acts on their part which *797should have been offset from the damages sustained by him.
1. The district court, in its memorandum decision, stated that the $35,000 in building materials was part of the consideration in which the parties entered into their agreement. We find this statement supported by substantial and competent evidence in the form of testimony given by Olsen:
Q. By Mr. Anderson: What was your understanding then of this arrangement in the transaction which you were involved as to this $35,000?
A. In the negotiations putting the project together there was four prerequisites and that was one of them, that Country Club Sports would furnish $35,-000 worth of building materials, it was my understanding, to be put into the facility and then the amount of the lease that was taken into consideration, they would put that in there. It was also taken into consideration in the amount of the lease, in arriving at the least price— excuse me, the rent figure.
Q. The amount that the rental came out to be considered, that was taken into account as you say I guess is what you are telling me?
A. Yes, taken into the consideration of the amount of the rental payment. R., Vol. 2, p. 193.
Accordingly, because the $35,000 was part of the bargained-for consideration of the lease, we affirm the district court’s refusal to offset that amount from the damages sustained by Olsen; the materials contributed by the defendants to the building of the ice skating facility were not benefits that unjustly enriched Olsen.
2. We likewise find no unjust enrichment in the value received by Olsen resulting from the defendants maintaining in good condition the $100,000 worth of equipment used at the facility. Such a duty was imposed upon the defendants by the terms of the lease. Part IV.B. of the lease required the defendants to provide and maintain in good repair $100,000 worth of equipment to be used at the ice skating facility. Thus, defendants’ maintenance of the equipment, like the building materials, was simply part of the bargained-for consideration by which the parties entered into the lease. We do not understand that compliance with the terms of a lease or contract, which is thereafter surrendered or cancelled, amounts to an unjust enrichment of the other party to the agreement. Accordingly, as to these two issues, we reject defendants’ arguments.
V.
A fourth issue on appeal is the amount of damages for which the defendants are responsible. The district court’s method of computing damages was to list amounts falling due at appropriate dates and compute interest as of the date each debit was incurred. Having changed the date of surrender, we will recompute on the basis of a surrender of May 19, 1981. The district court discerned that the defendants were at the time responsible for $74,747.13 in unpaid rent and other costs, and $4,349.37 in interest for a total of $79,096.50, but deducted $64,101.84 as credit for value of equipment Olsen repossessed and later sold at the UCC sale. Thus, as of May 19,1981, net damages were $14,994.66. We therefore vacate the district court’s June 27, 1984 judgment, and direct it to enter a new judgment as of that date for $14,994.66. We also vacate the district court’s prior award of costs and attorney’s fees, with directions that upon remand, in light of this opinion, such be reconsidered, with the award and amount thereof, if any, to be determined by the district court.
For the foregoing reasons, we affirm in part, reverse in part, and remand this case to the district court for further proceedings consonant with this decision.
Costs on appeal to appellants, but no attorney’s fees included therein.
OLIVER, Acting J., concurs.

. The attorney’s fees were awarded pursuant to a provision in the lease.

. In Ehlert v. Woods, 57 Idaho 218, 63 P.2d 1000 (1936), this Court was confronted with the issues of whether a surrender of a four-year lease involving farm land had occurred, and if it had, when it occurred. In writing for the majority, Justice Ailshie affirmed the trial court’s finding, however, that the surrender had occurred on September 15, 1931, stating that there was not “substantial” evidence in the record to sustain the lower court, but rather the evidence in the record showed that August 4, 1931 was the surrender date. Id. at 224, 63 P.2d at 1002. In Ehlert, the court treated both issues as factual ones, and employed a standard of review that inquired only into whether substantial evidence in the record existed by which the court could affirm the lower court’s findings.

. While the Supreme Court formulated this rule in the context of a lessor-lessee dispute involving personal property, we do not see why it is not applicable to a lease involving real property.

. It is important to remember exactly what Olsen threatened to do in his April 24 notice. That notice reads in pertinent part:
Gary Olsen, as lessor under the lease arrangement, hereby exercises his option to terminate and forfeit the lease immediately upon such default. Gary Olsen hereby exercises his right to immediately re-enter the leased premises upon the occurrence of a default and shall thereupon immediately assume possession and control of the leased property. Gary 01-sen, as lessor, hereby elects to immediately accelerate all rent to become due after default so that it shall then be due and payable. Upon such default, lessor also elects to take possession of the personal property subject to the security interest given in paragraph IV-B of the Lease Agreement pursuant to Idaho Code § 28-9-503. Gary Olsen, as lessor, will then proceed to sell the personal property the subject of the security interest under such terms and conditions as are required by the lease and by the Idaho Uniform Commercial Code. Also, Gary Olsen, as lessor, shall seek to re-lease the premises and otherwise mitigate damages and will proceed to force the collection of the total amount of rent then due under the terms of the Lease Agreement.
R., Vol. 3, pp. 88-89 (emphasis added).