Boise Joint Venture v. Moore

Citation106 Or.App. 83,806 P.2d 707
PartiesBOISE JOINT VENTURE, a general partnership; George A. Brown and Joan T. Brown, for the George A. Brown Family Trust; George E. Brown and Janice Y. Brown, for the George E. Brown Family Trust; John Stephen Becharas, Co-Trustee Under the Trust Indenture of John Stephen Becharas and Angeline Becharas; Glenn W. Graf, Sr., Trustee of the Graf Family Trust; Lawrence Herman, Trustee of the Lawrence Herman Trust, and individually; Ruth Herman; Carl Nevoso; Lydia D. Nevoso; William Woolman; Joanne Woolman; Raymond Miller; Betty Miller; George A. Brown; Theodore J. Becharas; William G. Moseley; Daphne Moseley; Paul Alary, Trustee of the Alary Family Trust; Dorothy Alary, Trustee of the Alary Family Trust; Jensen and Horowitz, by Alex C. Horowitz, Respondents-Cross-Appellants, v. Teddy N. MOORE, dba Nendel's Motor Inns, Appellant-Cross-Respondent. A8808-04289; CA A62081.
Decision Date20 February 1991
CourtCourt of Appeals of Oregon

Stephen G. Leatham, Vancouver, Wash., argued the cause for appellant-cross-respondent. With him on the briefs was Williams, Kastner & Gibbs, Vancouver, Wash.

Barry L. Adamson, Lake Oswego, argued the cause for respondents-cross-appellants. With him on the briefs were Roger Hennagin and Hennagin & Shonkwiler, Lake Oswego.

Before BUTTLER, P.J., and ROSSMAN and DE MUNIZ, JJ.

DE MUNIZ, Judge.

Plaintiffs, Boise Joint Venture (BJV), and its general partners, brought this breach of contract action. Defendant was held liable on BJV's motion for partial summary judgment. After a trial to the court on the issue of damages, a judgment for damages and attorney fees was entered in favor of BJV. We reverse in part on defendant's appeal and affirm on the cross-appeal.

Plaintiff George E. Brown has invested in motels and hotels for 35 years. In 1982, he was contacted by a broker about purchasing a motel in Boise, Idaho. Brown was not interested for several reasons, one of which was the need to find a qualified tenant to operate it. The broker later contacted Brown and told him that defendant was interested in leasing the motel. After meetings and negotiations, Brown formed a partnership (BJV) for the sole purpose of purchasing the motel.

BJV's purchase of the motel and its lease to defendant took place on September 1, 1982. The lease was to run from September, 1982, to August, 1992. The rental payments were $22,542.58 per month for the first year and $28,542.58 per month thereafter. The lease contained a provision that the rents were $6,000 per month more than the payments on the underlying debt and were to remain $6,000 more in the event that BJV's underlying debt on the property was restructured.

From the beginning, the motel generated a negative cash flow, and defendant's payments were almost always late. In an effort to attract more business, defendant built, with BJV's consent, an "Executive Wing" at a cost of approximately $700,000. However, the property continued to lose money and, in April, 1988, defendant discontinued payments and informed BJV that he would make no more payments under the lease. The BJV partners discussed their options, determined that the debt of BJV exceeded the value of the property and decided to let the property go to foreclosure. It was sold at foreclosure in October, 1988.

The trial court held, and the parties do not dispute, that Idaho law controls. Defendant first assigns error to the trial court's award of damages measured by the net lease payments due after October 14, 1988, the date of the trustee's sale of the property. Defendant argues that, under Idaho law, the sale ended both BJV's ownership interest and defendant's leasehold interest, thereby terminating any interest on which BJV could recover lost rent.

BJV does not dispute that Idaho follows the "majority rule" that a landlord may not recover from a tenant any rents that accrue after a termination of the landlord's status as landlord, whether by sale or involuntary transfer. It contends, however, that the rule does not apply here, because the lease specifically provided that the monthly rent would always be $6,000 more than the underlying debt. BJV argues that, because the award is for the anticipated lease profits of $6,000 per month, which BJV would have realized but for the foreclosure, the damages are not for future rent but are for lost profits and, therefore, are determined by contract, not property law.

However, under Idaho law, once its status as landlord terminated, BJV lost its right to rely on the agreement between the parties. Idaho law subordinates contract law to the common law landlord-tenant rules:

"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.

"As a result of a surrender, all rights and responsibilities which would otherwise accrue 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.

"We have underscored the words 'tenancy' and 'leasehold' [sic] to emphasize that it is the lease agreement and all rights and responsibilities flowing from it which are surrendered." Olsen v. Country Club Sports, Inc., 110 Idaho 789, 793, 718 P.2d 1227 (App.1985). (Citations omitted; emphasis in original.)

Defendant surrendered his tenancy when he notified BJV that he would make no more payments under the lease. BJV's conduct was inconsistent with the continuation of the tenancy when it let the property go to foreclosure. That conduct constituted acceptance of the surrender by operation of law. See Olsen v. Country Club Sports, Inc., supra, 110 Idaho at 794, 718 P.2d 1227. Even if, as BJV argues, $6,000 is a "contractually-identified" anticipated profit "contemplated by the parties," nonetheless, under Idaho law, any right to that profit under the contract was extinguished on the date of the trustee's sale. It was error to award damages for amounts due after October 14, 1988. 1

Defendant next assigns error to the award of late fees, arguing that BJV waived any right to them. Under Idaho law, waiver is a question of fact and must be shown by a clear intent to waive, although that intent may be established by conduct. Riverside Development Co. v. Ritchie, 103 Idaho 515, 650 P.2d 657 (1982). Defendant contends that BJV's intent to waive is shown by its acceptance, for more than five years, of late payments without any demand for late fees.

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3 cases
  • In re Kmart Corp.
    • United States
    • United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois
    • February 14, 2007
    ...costs and risks associated with operating and owning the property." (Kmart's Memorandum, p. 36), see also, Boise Joint Venture v. Moore, 106 Or.App. 83, 806 P.2d 707, 710 (1991)(court, construing agreement under Idaho law, held that lease indemnity covered actions by third-parties, not clai......
  • P.S.G. Ltd. Partnership v. August Income/Growth Fund VII
    • United States
    • Supreme Court of New Mexico
    • June 14, 1993
    ...and perfects its senior lien on the rents, regardless of the expiration of the redemption period. They cite Boise Joint Venture v. Moore, 106 Or.App. 83, 806 P.2d 707 (1991) (decided under Idaho law). "[O]nce its status as landlord terminated, BJV lost its right to rely on the agreement bet......
  • Pacificorp, an Or. Corp. v. Simplexgrinnell, LP
    • United States
    • Court of Appeals of Oregon
    • May 15, 2013
    ...claims between the parties, was insufficient to allow one contracting party to recover from the other. In Boise Joint Venture v. Moore, 106 Or.App. 83, 86, 89, 806 P.2d 707 (1991), the plaintiff leased a motel building to the defendant and sought to recover its $600,000 investment in the pr......

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