No. 13641
IN THE SUPREME COURT OF THE STATE OF MONTANA
KENNETH K. KNIGHT and
GRACE L. KNIGHT, his wife,
Plaintiffs and Appellants,
-vs-
OM1 CORPORATION et al.,
Defendants and Respondents.
Appeal from: District Court of the Sixth Judicial District,
Honorable Jack D. Shanstrom, Judge presiding.
Counsel of Record:
For Appellants:
Dzivi, Conklin, Johnson and Nybo, Great Falls,
Montana
William Conklin argued, Great Falls, Montana
McDonald & Blackwood, Livingston, Montana
For Respondents:
Church, Harris, Johnson and Williams, Great Falls,
Montana
Earl J. Hanson argued, Great Falls, Montana
Submitted: June 2, 1977
Decided :
if C
Clerk
M r . J u s t i c e Daniel J. Shea delivered t h e Opinion of the Court.
P l a i n t i f f s Kenneth K. Knight and Grace L. Knight appeal
from a judgment entered pursuant t o an order granting p a r t i a l
summary judgment t o defendant OM1 Corporation (OMI) i n the
d i s t r i c t c o u r t , Park County. The d i s t r i c t court ruled t h a t
under the language of a l e a s e between p l a i n t i f f s , a s l e s s o r s ,
and OM1 a s lessee, p l a i n t i f f s were e n t i t l e d t o n e i t h e r f u t u r e
r e n t a l s nor damages based upon f u t u r e r e n t a l s following
p l a i n t i f f s ' cancellation of the lease.
The a c t i o n concerns the lease of a motel, r e s t a u r a n t , and
bar complex i n Livingston, Montana. O November 27, 1973,
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p l a i n t i f f s entered i n t o a twenty year l e a s e and supplemental
agreement with J. Reid Hoggan, Patrick R. Hoggan, and Kent A.
Hoggan, doing business a s a partnership. O June 26, 1974,
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Hoggans assigned t h e i r i n t e r e s t i n the l e a s e and the supplemental
agreement t o defendant OMI. P l a i n t i f f s consented t o t h i s assign-
ment i n an "Acknowledgement and Consent" dated April 15, 1975.
OMI became delinquent i n i t s r e n t payments f o r the months of
September, October, and November 1975 and p d a i n t i f f s delivered
w r i t t e n n o t i c e of t h e i r i n t e n t i o n t o cancel the lease. Following
p l a i n t i f f s ' voluntary termiration of the l e a s e , on December 15,
1975 they reentered and took f u l l possession of the property.
O January 27, 1976, p l a i n t i f f s f i l e d t h e i n s t a n t a c t i o n
n
seeking damages f o r being deprived of f u t u r e r e n t throughout
t h e e n t i r e term of the l e a s e , l e s s any sums recoverable i n
mitigation thereof. O August 20, 1976, OM1 f i l e d a motion
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f o r p a r t i a l summary judgment r a i s i n g the i s s u e of whether plain-
t i f f s could recover f u t u r e r e n t a l s a f t e r termination of the lease.
T h e r e a f t e r p l a i n t i f f s f i l e d t h e i r motion f o r p a r t i a l summary
judgment on t h e i s s u e of f u t u r e r e n t a l s a f t e r termination.
The i s s u e was b r i e f e d and argued by t h e p a r t i e s and t h e d i s t r i c t
c o u r t issued i t s opinion and order g r a n t i n g OMI'S motion f o r
p a r t i a l summary judgment on October 26, 1976. F i n a l judgment
on t h e o r d e r was entered on November 22, 1976. P l a i n t i f f s appeal.
P l a i n t i f f s , on appeal, present two i s s u e s f o r review:
( 1 Whether t h e l e a s e a t i s s u e contains any savings c l a u s e
preserving l e s s o r ' s r i g h t upon breach by l e s s e e t o sue l e s s e e
f o r damages based upon r e n t f a l l i n g due a f t e r c a n c e l l a t i o n of
the lease.
(2) Whether such a savings c l a u s e i s a p r e r e q u i s i t e t o t h e
r i g h t of l e s s o r t o sue t h e breaching l e s s e e f o r damages based on
r e n t f a l l i n g due a f t e r c a n c e l l a t i o n .
The p a r t i e s agree t h a t g e n e r a l l y , following f o r f e i t u r e ,
c a n c e l l a t i o n of a l e a s e and r e e n t r y by t h e landlord terminates
t h e l e a s e and with it a l l o b l i g a t i o n s , covenants, and s t i p u l a -
t i o n s dependent upon continuation of t h e term. 49 Am J u r 2d,
Landlord and Tenant, 51054; Bonnet v. Seekins, 126 Mont. 24, 30,
243 P.2d 317.
There i s a l s o no d i s p u t e t h a t a l e a s e may provide f o r t h e
performance of c e r t a i n o b l i g a t i o n s o r impose c e r t a i n l i a b i l i t i e s
a f t e r forfeiture. Such a provision, a savings c l a u s e , g i v e s t h e
landlord t h e r i g h t t o r e e n t e r and resume possession of t h e
demised premises following nonpayment of r e n t and t o hold t h e
t e n a n t s t i l l l i a b l e f o r subsequently accruing r e n t s o r f o r any
d e f i c i e n c y i n t h e r e n t r e s u l t i n g from r e l e t t i n g . 49 Am J u r 2d,
Landlord and Tenant, 51055. Provisions preserving t h e l a n d l o r d ' s
r i g h t t o recover f u t u r e r e n t have been given e f f e c t i n many
-3-
jurisdictions. See: McIntosh v. Gitomer, (D.C. Municipal Court
of @peals 1956), 120 A.2d 205, 206; Broniewicz v. Wysocki, 306
I11.App. 187, 28 N.E.2d 283,284; Walling v. C h r i s t i e & Hobby,
Inc., (1932, Tex.Civ.App.), 54 S.W.2d 186,188.
I n t h e absence of c l e a r language expressly preserving such
r i g h t , courts generally w i l l not construe a l e a s e a s providing
t h a t , upon reentry o r f o r f e i t u r e , the tenant s h a l l remain l i a b l e
f o r unaccrued r e n t . Anno. 99 A.L.R. 42,45; Grommes v. S t . Paul
Trust Co., 147 Ill. 634, 35 N.E. 820, 822 (1893) ; Rohrt v.
Kelley Manufacturing Company, 162 Tex. 534, 349 6.W.2d 9538
P l a i n t i f f s contend two clauses of t h e l e a s e i n i s s u e
expressly preserve t h e i r r i g h t t o recover f u t u r e r e n t o r
damages based upon f u t u r e r e n t following cancellation and reentry.
The p e r t i n e n t language, from the d e f a u l t provision, s t a t e s :
" .
15 D F U T
EA L
" I f an event of d e f a u l t a s provided above s h a l l
occur, Lessor s h a l l have the r i g h t , on n o t i c e , immediately
t o cancel t h i s l e a s e , and the l e a s e s h a l l immediately
terminate, and Lessor s h a l l have the immediate r i g h t t o
re-enter and repossess t h e demised premises *** and
Lessor may re-enter the demised premises, and remove a l l
persons therefrom without being g u i l t y of t r e s p a s s and
without prejudice t o any remedies f o r accrued r e n t s o r
damages * * *.
"In addition t o the r i g h t of Lessor t o cancel the
l e a s e a s above provided f o r i n t h i s Section and without
waiver of such r i g h t , Lessor may sue Lessee f o r damages -
f o r non-compliance with any covenant, agreement o r warranty
contained i n t h i s l e a s e o r f o r non-payment of such sum
required t o be paid by Lessee t o Lessor o r f o r s p e c i f i c
performance of any covenant of t h i s lease. **
*It
(Emphasis added.)
P l a i n t i f f s argue t h a t under t h e f i r s t paragraph above,
which provides t h a t t h e l e s s o r i s authorized t o r e e n t e r t h e
premises "without p r e j u d i c e t o any remedies f o r accrued r e n t s
o r damages'' they have a r i g h t t o recover, a s damages, f u t u r e
unaccrued r e n t .
Cases c i t e d by p l a i n t i f f s i n support of t h i s argument a r e
c l e a r l y d i s t i n g u i s h a b l e from t h e i n s t a n t case. I n C.D. Stimson
Co. v. P o r t e r , (10th Cir.1952) 195 F.2d 410, t h e l e s s o r ' s
claim was founded on f e d e r a l bankruptcy law which allows claims
based on unexpired l e a s e terms. I n United S t a t e s Rubber Company
v. White T i r e Company, 231 S.C. 84, 97 S.E.2d 403 (1956), and i n
Employment Advisors, Inc. v. Sparks (1963 Tex.Civ.App.), 364
S.W.2d 478, t h e l e s s e e abandoned t h e premises p r i o r t o t h e
l e s s o r ' s reentry.
This c l a u s e does give p l a i n t i f f s t h e r i g h t t o cancel and
r e e n t e r without l o s i n g t h e i r r i g h t t o recover r e n t and damages
accrued t o t h e t i m e of c a n c e l l a t i o n . It cannot reasonably be
i n t e r p r e t e d t o continue defendant's o b l i g a t i o n t o pay r e n t
following c a n c e l l a t i o n under t h e t h e ~ r yt h a t i n t h i s c o n t e x t ,
"damages" by d e f i n i t i o n includes f u t u r e r e n t .
P l a i n t i f f s argue t h e second paragraph quoted from t h e
d e f a u l t provision, g i v e s them t h e r i g h t t o s u e t t f o r damages
f o r ~lon-ompliance with any covenant *** o r f o r non-payment
of such sum required t o be paid'' and t h e r i g h t t o recover f u t u r e
r e n t i n a d d i t i o n t o t h e i r r i g h t t o cancel t h e l e a s e . N such
o
s u r e i n t e r p r e t a t i o n follows from t h e language of t h e clause.
I f p l a i n t i f f s d e s i r e d t o preserve t h e i r r i g h t t o recover damages
f o r nonpayment of r e n t whether o r n o t and before o r a f t e r t h e
l e a s e has been cancelled, they should have s o ~ a t e d .T h i s c l a u s e
does not expressly continue defendant's l i a b i l i t y f o r r e n t
unaccrued a t the time of cancellation and r e e n t r y by p l a i n t i f f s .
P l a i n t i f f s contend even i f the l e a s e does not expressly
preserve t h e i r r i g h t t o recover future r e n t , it can be so
construed a s t o contemplate such recovery. W hold, however,
e
a lease must contain c l e a r language t o the e f f e c t t h a t a tenant
i s t o remain l i a b l e f o r r e n t accruing subsequent t o the land-
l o r d ' s c a n c e l l a t i o n , i f such l i a b i l i t y i s t o be imposed. Here,
the l e a s e language was not c l e a r ; it i s therefore unnecessary
t o r e s o r t t o construction of t h e l e a s e t o f i n d whether o r n o t
such a savings clause was intended.
F i n a l l y , p l a i n t i f f s argue the l e a s e i n i s s u e should be
t r e a t e d a s a contract r a t h e r than a conveyance of an i n t e r e s t
i n land. They c i t e Wright v. Baumann, 239 Or.410, 398 P.2d 119,
which concerned t h e duty of a l e s s o r t o mitigate damages following
the l e s s e e ' s repudiation of a contract t o make a lease. In
Wright the court indicated t h e business l e a s e t r a n s a c t i o n in-
volved was "essentially" a c o n t r a c t , and t h a t contract law
p r i n c i p l e s would apply.
The present case involves a l e a s e , not a contract t o make
a lease. P l a i n t i f f s contend Wright supports t h e argument t h a t
following c a n c e l l a t i o n f o r nonpayment of r e n t , damages based
on r e n t due f o r the e n t i r e term of t h e l e a s e should be recover-
able. Whether o r not p l a i n t i f f s ' contention i s c o r r e c t , we
r e j e c t the argument t h a t contract p r i n c i p l e s apply i n t h i s context.
Section 17-301, R.C.M. 1947, pertaining t o the measure of damages
f o r breach of c o n t r a c t , i s a l s o not applicable here.
As stated, the general rule is that cancellation and
reentry by the landlord, as in the present case, terminates the
lease agreement. A savings clause imposes a special liability
on the tenant which would o t h e d e not exist. To have effect,
a savings clause must be explicit as to the right reserved.
The language here was not explicit, and the decision of the
district court was correct.
Judgment is a£finned.
ww
Chief Justice
Justices.