NO. 82-238
I N THE SUPREME COURT OF THE STATE OF MONTANA
1983
MICHAEL J . LEMLEY,
Plaintiff and Appellant,
VS.
B A R B A R A ALLEN, d / b / a
CACTUS RECORDS,
Defendant and Respondent.
Appeal from: D i s t r i c t Court of the Eighteenth Judicial D i s t r i c t ,
I n and f o r t h e County o f G a l l a t i n
H o n o r a b l e W. W . L e s s l e y , J u d g e p r e s i d i n g .
Counsel of Record:
For Appellant:
B r i d g e r Law O f f i c e , B r i d g e r , M o n t a n a
J o s e p h E . Mudd, B r i d g e r , M o n t a n a
Rodney S c h w a s i n g e r , Bozeman, Montana
For Respondent:
Landoe-Brown Law F i r m , Bozeman, Montana
Submitted on b r i e f s : November 5 , 1982
Decided: February 2 4 , 1 9 8 3
Filed:
FEB 2 4 I983
e
& fq, L~&--,/
Clerk
.
Mr. Justice Fred J. Weber delivered the Opinion of the
Court.
Michael Lemley brought an action in the District Court
of the Eighteenth Judicial District, Gallatin County, against
his lessee, Barbara Allen. Lemley sought declaratory relief
and unspecified damages for Allen's failure to vacate the
leased premises. Allen counter-claimed, alleging that Lemley
had converted the premises to his own use and violated her
peaceful possession. Allen sought $12,000 in general damages
and $50,000 in punitive damages. The case was tried to the
judge, who found for Allen. The judge awarded Allen no
general damages, but did award her $500 in punitive damages,
plus attorney fees and costs. Lemley appealed. We affirm in
part and reverse in part.
Appellant Lemley leases a portion of the Baxter Hotel in
Bozeman. On March 10, 1978, he and respondent Barbara Allen
entered into a sub-lease agreement whereby Allen leased an
area in the basement of the Baxter Hotel from Lemley. The
sub-lease was for a five-year term and the lease payment wa.s
originally set at $150 per month. In the fall of 1979 Allen
decided that she would like to lease more of the basement
from Lemley. Lemley agreed to lease the additional space,
and he and Allen orally agreed that the lease payment should
be raised to $220 per month. Allen began paying this amount
in January of 1980.
On January 9, 1980, Lemley executed and delivered to
Allen a new sub-lease. The term was five years, although the
term began on March 10, 1978. The new lease reflected the
new increase in lease payments, but was otherwise essentially
the same as the previous lease. Allen gave the lease to her
attorney, who suggested certain changes. The changes were
not acceptable to Lemley. No further negotiations took
place. Allen continued in possession and made her $220
payments, which were accepted by Lemley.
In late July of 1980 Allen had a telephone conversation
with Lemley in which she told him that the changes in the
lease that her attorney had requested weren't that important
to her and that she would sign the lease and deliver it to
him. The signed lease was mailed to Lemley in early August.
Lemley called Allen after he received the lease in the mail
and told her that he understood that she intended to move her
business to a different location. Allen confirmed this and
asked Lemley if he wanted the premises returned to him.
Lemley said he wasn't sure. Several weeks later Lemley
called Allen and told her that she must vacate by September
20 because he had found another sub-lessee. Allen had been
negotiating with several potential sub-lessees herself, and
told Lemley that she thought that she and he had a valid
lease. Lemley disagreed and said that only a month-to-month
lease was in effect. Lemley's attorney sent Allen a letter
on September 5 telling her that she was in anticipatory
breach of the lease because she intended to move. On October
9 Allen was sent another letter telling her that the only
lease in effect was a month-to-month oral agreement, and that
as of November 9 her rent would be $687.50 per month.
(Lemley had become aware in the late summer that his own
lease payments would increase substantially in January 1981.)
Allen continued to pay $220 per month up to the time of trial
in January 1982. Lemley accepted all of these payments.
Trial was had on Janua.ry 14, 1982. The judge found that
the parties had orally amended the original lease, and that
the original lease with oral amendment was in effect until
Allen's execution and return of the second lease, which
constituted a valid. acceptance of that lease. The judge held
that Lemley had disregarded Allen's right to peaceful
possession. Allen was awarded $500 in punitive damages plus
attorney fees. The judge found that there was insufficient
evidence to warrant an award to Allen for lost rents caused
by her inability to sublet the premises.
Lemley appealed, and raises the following issues:
(1) Was there a valid written lease between the
parties?
(2) Was an award of punitive damages proper?
(3) Was an award of attorney fees proper?
(4) Were costs properly allowed?
The judge was correct in finding that the parties had
orally modified the original lease. A contract in writing
may be modified by an executed oral agreement. Section
28-2-1602, MCA. An oral agreement modifying a written
agreement is executed when its terms have been fully
performed. Here, Lemley allowed Allen to use more space, and
she in turn paid more rent. We have previously held that an
executed verbal agreement to expand the leased premises and
increase the rental payments modifies a lease agreement.
Kosena v. Eck (1981), Mont . , 635 P.2d 1287, 1291, 38
St.Rep. 1736, 1740. Therefore, the original lease was
modified (but still in effect) in January 1980.
The judge was also correct in finding that Allen's
execution of the second lease in July resulted in a validly
executed contract. Allen never rejected Lemley's offer. At
most, she had her attorney make an inquiry in regard to the
possibility of other terms. Such an inquiry does not
constitute a rejection. W. Jaeger, 1 Williston - Contracts
on
551 at 166, (3rd ed. 1957) . Furthermore, Lemley did nothing
to revoke his offer. Section 28-2-512, MCA. Although it is
true that a considerable period of time passed before
acceptance by Allen, it was not an unreasonable time under
the circumstances. The parties were operating under an
orally modified written agreement that was in most respects
identical to the second agreement. The passage of time did
not work a revocation.
The District Court was correct in finding that the
written leases were effective. The parties were not
operating under a tenancy at will, and Lemley did not have
the power to order Allen to vacate or to raise her rent.
Appellant Lemley argues that the award of punitive
damages was improper, and we agree. Allen's counter-claim
was based upon Lemley's supposed conversion of the premises
and interruption of Allen's peaceful possession. Conversion
and interruption of peaceful possession both sound in tort,
and may be proven in order to establish a cause of action
independent of the contract, which could support punitive
damages. However, Allen could not be awarded punitive
damages upon her theory of conversion, because conversion is
a tort applicable to personal chattels, and any interference
with her leasehold interest would have been interference with
a real chattel. Nor does the record support an award of
punitive damages upon her theory of interference with
peaceful possession. Allen told Lemley in August that she
would be moving out in October. There is no indication in
the record that Lemley's actions caused Allen to vacate the
premises sooner than she had planned. While it is true that
Lemley would not agree to allow Allen to sub-lease to a third
party after she moved, that was his right under the
agreement. There has been no proof of tortious conduct by
Lemley .
In the absence of tortious conduct, an award of punitive
damages based upon a simple contract action cannot stand.
Section 27-1-221, MCA; section 27-1-311, MCA. Punitive
damages should not have been allowed.
Appellant's third issue, which challenges attorney fees,
is totally without merit. Both leases contained this clause:
"In the event that either of the parties is
required to bring an action at law, then the
prevailing party shall be entitled to recover all
costs including a reasonable attorney ' s fee, costs
of discovery and court costs necessary in
prosecuting the action."
A request for attorney fees was contained in Allen's answer.
Allen prevailed in her defense. Obviously, the award of fees
was proper.
It is Lemleyls final contention that costs should not
have been allowed to Allen because no memorandum of costs was
served upon him. Section 25-10-501, MCA provides that " [tlhe
party in whose favor judgment is rendered and who claims his
costs must deliver to the clerk and serve upon the adverse
party ... a memorandum of the items of his costs and
necessary disbursements in the action. . ." This Court has
held that the statute governing costs must be strictly
followed, and a failure to serve a memorandum upon the
adverse party deprives the district court of jurisdiction in
the matter. Riddell v. District Court (1906), 33 Mont. 529,
85 P.367. The award of costs was improper and must be
reversed.
We must note that the respondent has attempted use of
Rule 14, Montana Rules of Appellate Civil Procedure, to
challenge the failure of the District Court to award her
actual damages. The respondent did not cross-appeal.
"Although Rule 14 provides for review of matters by
cross-assignment of error, this does not eliminate
the necessity for cross-appeal by a respondent who
seeks review of rulings on matters separate and
distinct from those sought to be reviewed by the
appellant. [citation.] A respondent who has not
cross-appealed may not seek a determination of the
amount involved more favorable to him than that
made bv the court below."
4
Johnson v. Tindall
(1981) Mont. , 635 P.2d 266, 268, 38 St.Rep.
1763, 1766.
The portions of the judgment which awarded punitive
damages and costs are reversed. The cause is remanded for
appropriate amend-ment of the judgment.
We concur: