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. J u s r i c e F r a n k 8. M o r r i s o n , J r . , d e l i v e r e d t h e Opinion of
t h e Court.
N i c h a e l a n d J o a n Lemley a p p e a l t h e F e b r u a r y 5 , 1982,
judgment of the District C o u r t of the Eighteenth J u d i c i a l
District adopting the landlord, Bozeman Community Hotel
Company's i n t e r p r e t a t i o n of the r e n t c l a u s e of a November
29, 1976, a s s i g n e d l e a s e between t h e p a r t i e s . W affirm the
e
judgment of t h e D i s t r i c t C o u r t .
On May 1 9 , 1 9 7 5 , P a u l C a r t e r , P r e s i d e n t of RX E n t e r -
prises, Inc., entered into a lease with respondents for
p r e m i s e s i n t h e " B a x t e r H o t e l , " Bozeman, Montana. The l e a s e
was for the period from January 11, 1 9 7 6 t o January 10,
1961. With respondent landlord's permission, Paul Carter
a s s i g n e d h i s l e a s e t o M i c h a e l a n d J o a n Lemley o n November
The l e a s e c o n t a i n s a c l a u s e a l l o w i n g f o r its renewal
f o r two a d d i t i o n a l f i v e - y e a r c o n s e c u t i v e terms. That c l a u s e
states:
"19. T h a t upon t h e e x p i r a t i o n of t h e
p r i m a r y term of t h i s Lease and Agreement,
t h a t is t o s a y f r o m J a n u a r y 11, 1 9 7 6 ,
t h r o u g h and i n c l u d i n g J a n u a r y 1 0 , 1 9 8 1 ,
Tenant is granted t h e o p t i o n t o l e a s e
t h e s e p r e m i s e s f o r two ( 2 ) a d d i t i o n a l
f i v e ( 5 ) year consecutive terms with t h e
same t e r m s and c o n d i t i o n s a s h e r e i n a b o v e
set f o r t h f o r each of t h e f i v e ( 5 ) year
consecutive periods, with the exception
t h a t t h e amount o f minimum b a s e r e n t a l i n
t h e sum o f Four Hundred D o l l a r s ( $ 4 0 0 . 0 0 )
a s set f o r t h nereinabove, s h a l l a t t h e
e x p i r a t i o n of t h e f i r s t f i v e ( 5 ) y e a r
l e a s e p e r i o d be changed a s f o l l o w s :
" ( a ) The sum o f t h e b a s e r e n t a l s h a l l b e
c h a n g e d t o r e f l e c t t h e i n c r e a s e o r de-
c r e a s e i n t h e c o s t of l i v i n g index occur-
ring during the f i r s t f i v e (5) years for
t h e t e r m of t h i s L e a s e a n d Agreement
s h a l l e i t h e r increase or decrease the
amount o f b a s e r e n t a l t o b e p a i d ( i n t h e
sum of $400.60 p e r m o n t h ) by t h e same
p e r c e n t a g e w h i c h t h e consumer p r i c e i n d e x
has risen or fallen during the first five
(5j 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 de-
crease 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 o f Monthly Percentage of Increase o r
Rental Derived x Decrease Cost of P r o p e r t y
From ( a ) Taxes and U t i l i t i e s
Mr. Lemley d i s a g r e e d . He a r g u e d t h a t a l t h o u g h f o r m u l a
( b ) above c o r r e c t l y r e f l e c t s t h e language of the formula set
forth i n Clause 1 9 ( b ) , t h e language of t h e formula is n o t
consistent with the stated intent of Clause 19(b). The
intent is f o u n d i n t h e f i r s t s e n t e n c e o f C l a u s e 1 9 ( b ) , " t o
r e f l e c t t h e y e a r l y i n c r e a s e o r d e c r e a s e i n t h e c o s t t o Land-
l o r d of p r o p e r t y t a x e s and u t i l i t i e s . "
On F e b r u a r y 2 6 , 1 9 8 1 , Lemley f i l e d a c o m p l a i n t i n t h e
Eighteenth J u d i c i a l D i s t r i c t Court requesting, among o t h e r
things, a d e c l a r a t o r y judgment c o n s t r u i n g t h e t e r m s 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 t h e new b a s e rent rather
t h a n b e m u l t i p l i e d by i t . H e p r e s e n t e d n o f o r m u l a by w h i c h
t o accomplish t h a t r e s u l t .
Lemley p r e s e n t e d two other causes of action in his
complaint. He r e q u e s t e d c r e d i t f o r u t i l i t i e s p a i d by him
contrary to the terms of the lease and compensation by
Bozeman Community H o t e l f o r l o s s o f income s u f f e r e d when t h e
l a n d l o r d unreasonably denied Lemley's r e q u e s t s t o s u b l e t t h e
premises.
A h e a r i n g was h e l d O c t o b e r 19, 1981, f o l l o w i n g which
the District Court issued a judgment February 5, 1982,
ordering:
1. That landlord recover f r o m Lemley, "the sum o f
$3,908.01, being the sum o f $1,257.60 per month for rent
from January, 1981, through October, 1981, for a total
rental of $12,576.00, less the surn o f $7,220.00 as p a i d
t h r o u g h d a t e of O c t o b e r , 1 9 8 1 , and l e s s t h e sum of $ 1 , 4 7 7 . 9 9
f o r e l e c t r i c a l b i l l s p a i d by P l a i n t i f f s . "
2. T h a t Lemleys p a y t o l a n d l o r d " t h e sum of $ 1 , 2 5 7 . 6 0
p e r month from November 11, 1 9 8 2 and on t h e 1 1 t h d a y of e a c h
month t h e r e a f t e r , f o r t h e r e m a i n i n g term o f t h e L e a s e of t h e
premises in the baxter Hotel, referred to as the i3axter
Pharmacy, t h r o u g h J a n u a r y 9 , 1 9 8 6 . "
3. That Lemley's c l a i m f o r damages c a u s e d by l a n d -
l o r d ' s f a i l u r e t o c o n s e n t t o s e v e r a l p r o p o s e d s u b l e t t e r s be
dismissed.
4. T h a t a t t o r n e y f e e s and c o s t s t o t a l i n g $ 3 , 2 6 3 . 0 0 be
awarded l a n d l o r d .
I n a p p e a l i n g t h e judgment, Lemley p r e s e n t s t h e f o l l o w -
ing i s s u e s f o r our review:
1. What i s t h e p r o p e r i n t e r p r e t a t i o n of C l a u s e 1 9 of
t h e i e a s e and agreement?
2. Did the District Court properly determine the
amount o f r e n t owing and t o be p a i d ?
3. Was landlord's denial of consent to sublease
unreasonable?
4. Was Lemley entitled to recover attorney fees
i n c u r r e d w i t h r e g a r d t o h i s c l a i m f o r c r e d i t f o r t h e payment
of t h e e l e c t r i c a l b i l l s ?
W a f f i r m t h e d e c i s i o n of
e t h e D i s t r i c t Court in all
respects.
The D i s t r i c t C o u r t p r o p e r l y i n t e r p r e t e d C l a u s e 1 9 of
the lease. C o u r t s h a v e no a u t h o r i t y t o c h a n g e a c o n t r a c t
when i t s i n t e n t i s c l e a r . Williams v. I n s u r a n c e Company o f
N o r t h America ( 1 9 6 7 ) , 1 5 0 Mont. 292, 295, 4 3 4 P.2d 395, 397.
C o u r t s d o i n t e r p r e t c o n t r a c t s when a n a m b i g u i t y e x i s t s . An
a m b i g u i t y e x i s t s "wnen t h e c o n t r a c t t a k e n a s a w h o l e i n i t s
wording or phraseology is reasonably subject to two d i f -
ferent interpretations." Williams v. I n s u r a n c e Company o f
North America, s u p r a .
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 a s a w h o l e , t h e c o n t r a c t is r e a s o n a b l y s u b j e c t t o o n l y
one i n t e r p r e t a t i o n .
The formula is c l e a r and express. Courts may not
d i s r e g a r d t h e e x p r e s s l a n g u a g e of a c o n t r a c t . W i l l i a m s v.
I n s u r a n c e Company o f N o r t h A m e r i c a , supra. 'I'herefore, the
District Court properly adopted the formula for rent
i n c r e a s e s t a t e d w i t h i n Clause 19.
Lemley further complains that he requested only a
d e c l a r a t o r y judgment c o n s t r u i n g t h e t e r m s of t h e l e a s e , n o t
a c o u r t d e t e r m i n a t i o n of t h e r e n t amount owed p u r s u a n t t o
the lease. At trial, Bozeman Community Hotel introduced
many e x h i b i t s c o n c e r n i n g t h e c o s t o f l i v i n g i n d e x f r o m 1 9 7 6
t o 1 9 8 1 and t h e h o t e l ' s p r o p e r t y t a x a n d u t i l i t y e x p e n d i -
t u r e s from 1975 t o 1980. It then presented the following
c h a r t a p p l y i n g t h e f i g u r e s d e r i v e d from t h e o t h e r e x h i b i t s
t o t h e formulas s e t f o r t h i n Clause 19:
( a ) Amount o f B a s e Percentage of Increase o r
Rent x Decrease Cost of Living Index
Amount o f a a s e Cost of Living January 1981
Rent x Cost of Living January 1976
( b ) Amount o f Monthy P e r c e n t a g e of I n c r e a s e o r
Rental Derived x Decrease Cost of P r o p e r t y
From ( a ) T a x e s and U t i l i t i e s
Amount o t M o n t h l y C o s t of P r o p e r t y -Taxes a n d
Rental Derived x U t i l i t i e s 1980
From ( a ) C o s t o f P r o p e r t y Taxes and
U t i l i t i e s 1975
No o b j e c t i o n s were made t o t h e a d m i s s i o n o f t h o s e e x h i b i t s .
Lemley d i d r e q u e s t o n l y a d e c l a r a t o r y judgment in his
complaint. However, by f a i l i n g t o o b j e c t t o t h e a d m i t t a n c e
of t h e above e v i d e n c e used by the court t o determine the
proper rent amount, he impliedly consented to the rent
amount being determined by the court. Rule 15(b),
1ul.K.Civ.P.; R e i l l y v. Maw ( 1 9 6 5 ) , 1 4 6 Mont. 145, 155, 405
P.2d 440, 446. Therefore, we a f f i r m t h e D i s t r i c t C o u r t ' s
d e t e r m i n a t i o n of t h e amount of r e n t owing and t o b e p a i d .
The court acted within the scope of the pleadings, as
amended.
Clause 9 of the lease i n question requires landlord
consent p r i o r t o t h e s u b l e t t i n g of t h e 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
l a n d l o r d i n J a n u a r y 1978 r e g a r d i n g C a c t u s Records s u b l e t t i n g
t h e main f l o o r a l s o . L a n d l o r d d i s a p p r o v e d a s h e was wary o f
Cactus Records' business practices. Lemley n e x t a p p r o a c h e d
landlord regarding King-Gallatin expanding t h e P o i n t A f t e r
a into t h e main floor space. Landlord disapproved as
t h e r e w e r e a l r e a d y two b a r s i n t h e H o t e l and h e w a n t e d 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 land-
lord 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 con-
structed 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 submit-
ted 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:
7 LChief Justice a ~ q
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