Court Opinion

ID: 9632940
Source: CourtListenerOpinion
Date Created: 2023-08-22 11:28:43.519118+00
Date Added: 2024-06-11T18:08:24.801441
License: Public Domain

Rosellini, J.
(dissenting) — The majority opinion in this case has effectively rewritten the terms of a lease to accommodate the assignee of the landlord's interest. It is obvious that the petitioner, had it been the author of the lease, would have made time of the essence with respect to the payment of rent and would have conditioned the exercise of the options upon the timely payment of the rents as they fell due. It would also have conditioned the renewals upon the prospering of the tenant's business. But those are not the terms to which the original landlord assented and by which its assignee is bound. Nowhere in the lease is time made the essence of it, and there are no express conditions *816attached to the right to exercise the renewal options.
The lease which forms the subject matter of this controversy was given for the purpose of establishing and conducting a restaurant and bar business upon the premises, which were part of a shopping center operated by the landlord. Under its terms, the tenant, as well as the landlord, was required to contribute to the costs and participate in the making of improvements which would adapt the premises to that purpose. This work was done, and the business was conducted thereafter as the Hindquarter Restaurant.
Under the lease, which was executed in August 1967, rentals based on square footage were payable monthly, with an additional contingent rental based on a percentage of sales to be paid yearly. It was evidently contemplated that late payments would be tolerated, for the lease contained the following provision with respect to forfeiture:
Section 10.1 Default
This lease is made on the condition that if any default by Tenant continues after written notice, in case of failure to pay rent for more than ten (10) days, and such additional time, if any, as is reasonably necessary to cure the default; . . . Landlord may in any of such events immediately, or at any time thereafter, and upon giving the notice required by law, make entry and repossess the leased premises as of the Landlord's former estate, without prejudice to any other remedies Landlord may have[3]
If this provision were open to construction, it would be the duty of the court to construe it against the landlord, since he was not obliged to make any concessions which did not suit his purposes. The rule is that the courts will not extend nor enlarge the obligation of a lease beyond the plain meaning of the language used and the intention existing at the time the lease was made, and ambiguities must be resolved in favor of the tenant. Puget Inv. Co. v. Wenck, 36 Wn.2d 817, 221 P.2d 459, 20 A.L.R.2d 1320 *817(1950); 51C C.J.S. Landlord and Tenant § 232(2), (12) (1968). It is not suggested that this lease was prepared by the tenant.
However, there is no room for construction here. The provision plainly makes the landlord's right of forfeiture depend upon its having given the specified notice of demand. Twice in the course of the petitioner's tenure as landlord, it gave such notice to the respondent, and it appears that on both occasions, the arrearages were paid within the designated time.
Undoubtedly, the record shows a pattern of late rental payments; but this was a burden the landlord consented to bear until such time as he should see fit to demand the correction of the default. When the petitioner took its assignment of the lease in March 1976, however, the respondent was not in default.
With respect to the options to renew, these were granted in very plain language, unadorned by conditions or covenants on the part of the tenant. Section 2.2, entitled "Term", contains the sole provisions with respect to the option:
This lease shall be for an initial term of five years with two additional five year options to run successively, the first five year option to be exercised by notice thereof in writing not later than 30 days prior to the expiration of the first five year term and the second option to be exercised by notice thereof in writing not later than 30 days prior to the expiration of the first five year option period. The terms and conditions of this lease during said option periods shall be the same as those in effect at the time of the exercise of said options.
When the first option was exercised in September 1972, the landlord (petitioner's predecessor) granted an additional option to renew for a period of 10 years following the expiration of the second renewal term. Again, no conditions were attached to the exercise of the option. On the other hand, the landlord granted the tenant a right of first refusal to lease an equal or greater amount of space upon the same terms, should the landlord elect to construct replacement facilities involving the leased areas.
*818Thus, we do not have before us a lease in which the right to exercise an option to renew is conditioned upon the faithful performance of all the other terms and conditions of the lease, including the prompt payment of rent. Such a condition would, in fact, have been out of harmony with section 10.1, which made allowance for the toleration of late payments. Such a provision as section 10.1 is not an unusual one. It is in accord with the general rule, as expressed in the Restatement (Second) of Property § 12.1 (1977) which permits the landlord to terminate the lease for nonpayment of rent only after having made demand on the tenant for the rent that is due and having failed to receive prompt payment thereafter.
This provision also would most likely find favor with Professor Friedman, who, in his treatise on leases, says:
If a right to renew is conditioned on the tenant's not being in default, it should be clear that the renewal right is to be lost only if the tenant remains in default beyond any time given the tenant in the lease or by law otherwise to cure the default in question.
(Footnotes omitted.) 2 M. Friedman, Leases § 14.1, at 552-53 (1974). Professor Friedman also remarks in that section that few tenants pay rent promptly on the day that it is due and few landlords expect it.
Inasmuch as the lease before us does not condition the right to renew upon the prompt payment of rent and provides its own remedy for default, cases relied upon by the majority are not in point. In three of them, the right was expressly conditioned.
In Skillman v. Lynch, 74 S.D. 212, 213, 50 N.W.2d 641 (1951), the lessee was given the right to renew "if all the conditions [were] otherwise agreeable to all parties". The court held that this language indicated an intention to endow the lessor with a right to refuse renewal if any reasonable ground existed for regarding the tenant's use of the premises as disagreeable to him. Illegal use of the premises for gambling was held to be a sufficient ground, even though such use was not prohibited by the lease.
*819In both Gadsden Bowling Center, Inc. v. Frank, 249 Ala. 435, 31 So. 2d 648, 172 A.L.R. 1430 (1947) and Borden Mining Co. v. H. & W.A. Hitchins Coal Co., 163 Md. 250, 161 A. 181 (1932), the lease in question expressly conditioned the option to renew upon the faithful performance of the covenants. These cases stand for the proposition that where the right to renew is expressly conditioned on faithful performance, waiver of the right to declare a forfeiture, by accepting rental payments after default, does not constitute a waiver of the right to refuse renewal. This is the general rule. 2 H. Tiffany, Landlord and Tenant § 225 (1910); 51C C.J.S. Landlord and Tenant § 62(l)(b) (1968); Annot., Right To Exercise Option To Renew or Extend Lease as Affected by Tenant's Breach of Other Covenants or Condition, 172 A.L.R. 1436 (1948). The reason given for it is that the landlord may be willing to tolerate defaults during the term of the lease, but at the same time unwilling to relinquish his right to refuse renewal for these same defaults. The rule is sound as applied to the leases which were under consideration, but it has no application here.
Thus, the emphasis placed by the majority upon the trial court's holding4 that there was no waiver is unwarranted. We are here concerned with the question whether, under the terms of the lease, the landlord had a right to refuse renewal because of past defaults. If it had no such right— and I can find none within the four corners of the lease nor in the circumstances under which it was executed (insofar as those circumstances have been revealed to us) — then there was nothing for the landlord to waive.
The parties to this lease took into account the possibility of default in the performance of the tenant, and they made provision for the landlord's remedy in case of default. In such event it could declare a forfeiture, but only if the default was not cured within a specified time after demand for performance was made. When in 1977 the respondent *820notified the petitioner that it exercised its option to renew, it had not paid the rent for May and August. Instead of demanding that the arrearages be paid, the petitioner advised the respondent that, because of its "long and continuing history of defaults under the subject lease", the lease would not be renewed. In doing so, it arrogated to itself a remedy not contemplated by the parties to this lease.
The majority has also unearthed a few cases in which the courts have found a covenant to renew to be impliedly dependent upon due compliance of the lessee with other covenants in the lease. Two of those cases, Nork v. Pacific Coast Medical Enterprises, Inc., 73 Cal. App. 3d 410, 140 Cal. Rptr. 734 (1977) and Klepper v. Hoover, 21 Cal. App. 3d 460, 98 Cal. Rptr. 482 (1971), decided by the California Courts of Appeal, state it as a rule that there is such dependency between the covenants. While both of these cases declare the rule to be that payment of rent is an implied condition which must be met in addition to other express covenants in the lease before the option can be exercised, neither is persuasive authority for that proposition. Nork made no attempt to examine or interpret the lease. It cited one case, Klepper v. Hoover, supra (a declaratory judgment action not involving attempted exercise of an option but rather the validity of a lease). Klepper in turn cited Behrman v. Barto, 54 Cal. 131 (1880) and Streicher v. Heimburge, 205 Cal. 675, 272 P. 290 (1928). In Behrman the option was expressly conditioned on the lessees not being in default. Streicher was a case in which the lease provided that the rent for the renewal term should, in case of disagreement, be set by arbitrators. The court held that fixing the rent was not a condition precedent to renewal of the lease. The opinion concluded by distinguishing cases from other jurisdictions relied upon by the landlord, noting that these cases were to the effect that the affirmative conditions of the old term must be met before the new term vests.
The California rule, as stated in 42 Cal. Jur. 3d § 290 *821(1978), is that where a lessee's right to renew is dependent upon his performance of covenants or conditions contained in the lease, the nonperformance or breach thereof will defeat his right to renew the lease.
The Arkansas case, Lutterloh v. Patterson, 211 Ark. 814, 202 S.W.2d 767 (1947), was grounded upon a finding that there had been a material breach of the conditions of the lease, evidently a breach not curable or compensable. None of these cases dealt with a lease which provided its own remedy for defaults, as is the situation here.
While I see no reason to decide that question here, I would certainly concede for purposes of argument that a court can reasonably conclude that a material and incurable breach would be grounds for refusing to renew, even though, as here, compliance with the terms of the lease is not expressly made a condition precedent to exercise of the option. Were there such a breach, it would be surprising if the landlord did not exercise his right to declare a forfeiture, since by definition the breach could not be cured within the time provided in the lease. In that case there would be no need to search for an implied limitation on the right to renew. But it is obvious that the landlord who prepared this lease did not consider mere delay in performance a material breach, unless that delay was continued longer than the specified number of days after demand for performance.
It is the rule in this state that where the payment of rent is not expressly declared to be a condition precedent to the exercise of an option, the mere fact that the lessee is in arrears for rent when the option is exercised does not deprive the lessee of the right to the option. Henry v. Bruhn & Henry, Inc., 114 Wash. 180, 195 P. 20 (1921).5 This is the case relied upon by the Court of Appeals in reversing the trial court here. The majority has not seen fit to overrule it. That rule is in accord with the manifest intent of the lease here. That intent was to permit the *822landlord to declare a forfeiture if the tenant failed to make good any default within the time limited after demand was made upon him, and to deny to the landlord the right to refuse an option to renew where the lease had not been forfeited at the time of its exercise.
I would affirm the decision of the Court of Appeals.
Williams and Dore, JJ., concur with Rosellini, J.
Reconsideration denied October 23, 1981.

The landlord's "other remedy" would be to sue for the rent owed. See Restatement (Second) of Property § 12.1 (1977).

 Although denominated a "finding", the fact that late payments were accepted was not in dispute; thus the "finding" is actually a conclusion of law.

See also Keene v. Zindorf, 81 Wash. 152, 142 P. 484 (1914).