Carsten v. Eickhoff

• Decision Date: 26 February 1975
• Docket Number: No. 3--373A33,3--373A33
• Citation: 163 Ind.App. 294,323 N.E.2d 664
• Parties: A. Wayne CARSTEN and Doris M. Carsten, Appellants (Plaintiffs below), Midwest Aggregates Corp., Appellants (Defendant below), v. Charles W. EICKHOFF et al., Appellees (Defendants below).
• Court: Indiana Appellate Court

Page 664

323 N.E.2d 664

163 Ind.App. 294

A. Wayne CARSTEN and Doris M. Carsten, Appellants (Plaintiffs below) Midwest Aggregates Corp., Appellants (Defendant below), v. Charles W. EICKHOFF et al., Appellees (Defendants below).

No. 3--373A33.

Court of Appeals of Indiana, Third District.

Feb. 26, 1975.

Rehearing Denied April 15, 1975.

David B. Keller, Keller, Fleck & Holleran, Marvin S. Crell, Tourkow, Danehy & Crell, J. A. Bruggeman, Barrett, Barrett & McNagny, Fort Wayne, for appellants.

Jack R. Notestine, Notestine & Trotter, Fort Wayne, for appellees.

STATON, Presiding Judge.

The Carstens had a three year lease with an option to renew for ten years which permitted them to remove topsoil, gravel and sand from the Eickhoffs' farm. Midwest Aggregates Corporation became the Carstens' sublessee. Removal operations continued several years after the time for renewal had expired when the Eickhoffs gave notice that the lease would be terminated. The Carstens brought an action for a declaratory judgment contending that they were entitled to a ten year term under the option provision of the lease. The Eickhoffs maintained that the Carstens were tenants from year to year. Midwest filed a cross-complaint to have its rights declared as against the Carstens and the Eickhoffs.

The trial court declared that failure to exercise the 'option to renew' resulted in a tenancy from year to year. The Carstens and Midwest filed their motions to correct errors which raise these issues on appeal:

Issue One: Was a tenancy from year to year created when the Carstens failed to give notice of the exercise of their option to renew the lease for a ten year term?

Issue Two: Did the continued payment of royalties and the holding over create the right to equitable relief from the required notice to renew?

Issue Three: Did the trial court err when it failed to declare Midwest's rights against the Carstens?

We conclude that a year to year tenancy was created as declared by the trial court. The Carstens are not entitled to equitable relief since the holding over and the payment of royalties were not sufficient notice under the terms of the lease to exercise the option to renew. We affirm the trial court's judgment upon the above, and remand with instructions to enter judgment on the cross-complaint of Midwest.

I. Lease

The Carstens operated a gravel business from their farm in Waynedale, Indiana, and in 1964, they sold their gravel business to Midwest. After becoming an employee of Midwest, Mr. Carsten executed a mining lease with the Eickhoffs which permitted the removal of topsoil, gravel and sand. The Eickhoff-Carsten lease, executed in April, 1967, provided for a three year lease with 'four ten-year options to renew.' In return for the right of removal, the Carstens were to pay the following royalties to the Eickhoffs:

'. . . Lessees covenant and agree to deliver or pay to Lessors the sum of ten cents (10cents) for each yard of dirt removed from the premises and by Lessees disposed of on the market, and also the sum of eight cents (8cents) for each ton of gravel removed and marketed from the leased premises, and also four and one-half cents (4 1/2cents) per ton for quarried limestone across the scales.'

On August 15, 1968, the Carstens subleased their interest in the Eickhoffs' property to Midwest for ten years with 'four ten-year options to renew.' In consideration for the sublease, Midwest agreed to pay the Carstens:

'Lessee (sublessee) agrees to pay Lessor (lessee) ten cents (10cents) per yard on sand and gravel sold; ten cents (10cents) per yard on dirt sold and six cents (6cents) per ton of quarried limestone sold, computed on Actual truck scale weights, with a guarantee of not less than Three Thousand Dollars ($3,000.00) per year. . . .'

During the three year period of the Eickhoff-Carsten lease, the Eickhoffs received the following royalties:

For renewal of the ten year option, the Eickhoff-Carsten lease required:

'. . . Lessees shall notify Lessors at least sixty days prior to the expiration of the original lease, or any extension thereof, that they wish to exercise their option to renew the lease on the same terms and conditions.'

As to notice, the Eickhoff-Carsten lease provided:

'Any notices to be given under this lease shall be made in person or by certified mail to Lessors, 6124 Lower Huntington Road, Fort Wayne, Indiana 46809, . . .'

Neither the Carstens nor Midwest gave the Eickhoffs written or oral notice at anytime that they intended to exercise the ten year option. Following the expiration of the three-year term, Midwest continued to remove topsoil, gravel and sand from the Eickhoff property, and the Eickhoffs' were paid the following royalties:

On January 11, 1972, the Carstens were orally notified by Paul Eickhoff, one of the lessors on the Eickhoff-Carsten lease, that the Eickhoffs considered the lease to be terminated. This oral notice was followed by written notice to the Carstens on February 15, 1972 demanding vacation of the premises by April 15, 1972. The Carstens then filed the declaratory judgment action giving rise to this appeal on March 30, 1972.

II. Holding Over

The Carstens contend that the lease at issue should be construed as containing an option to extend rather than an option to renew. Under Indiana law, if a lessee has a privilege or option to extend under the lease, a mere holding over and payment of rent will be sufficient to exercise the privilege. However, if the lessee has an option to renew, a mere holding over and payment of rent will not be sufficient to exercise the option to renew. Fragomeni v. Otto Gratzol Signs (1951), 121 Ind.App. 167, 96 N.E.2d 275; G. S. Suppiger Co. v. Summit Gas & Water Co. (1949), 119 Ind.App. 102, 84 N.E.2d 207. The Indiana cases give little guidance as to the reason for this distinction. The rule seems to have developed in Indiana as an aid to the courts in determining the intention of the parties regarding the effect of holding over when there was some right in the lessee to a further term but no express contract provision regarding the effect of holding over. ¹ See C. Callahan Co. v. Michael (1910), 45 Ind.App. 215, 218--19, 90 N.E. 642, 643 (stating that '. . . an option of a renewal would seem to imply that the parties contemplated some affirmative act by way of the creation of an additional term. . . .') However, the lease at issue, whether construed as an option to extend or an option to renew, clearly required notice to the lessor of an intention to exercise the option before expiration of the current term. This notice requirement evidences an intent of the parties that there was to be no 'extension' or 'renewal' of the lease without the required notice. Regardless of whether the trial court construed the instant lease to contain an option to renew or an option to extend, the need for making the distinction has been eliminated by the notice requirement. ² We conclude that the giving of the required notice is a condition precedent to the right of renewal. In the absence of any right to equitable relief, the right of 'renewal' or 'extension' is lost if the notice is not given. Thus, if notice is stipulated in the lease, it must be given regardless of whether the lease provides for an option to extend or an option to renew. Since the lease at issue required notice 'in person or by certified mail' and no such notice was given, the mere holding over and payment of rent was not sufficient notice under the contract. The reasoning behind demanding exact compliance with the terms of the option including the notice provision is that the lessor is bound to grant the additional term while the lessee is free to accept or reject it. Thus, the courts will not hold the lessor to his promise any longer than he has agreed to be held. Sosanie v. Pernetti Holding Corp. (1971), 115 N.J.Super. 409, 279 A.2d 904, 908; University Realty & Development Co. v. Omid-Gaf, Inc. (1973), 19 Ariz.App. 488, 508 P.2d 747, 749.

III. Equitable Relief

Both Midwest and the Carstens contend that the Eickhoffs are estopped from denying a ten year renewal term, since they allowed Midwest to expend large sums of money and accepted royalties after the expiration of the lease. They further contend that the notice requirement has been waived. At the outset, it should be noted that the Carstens and Midwest, to the extent that the judgment determines Midwest's interest, are appealing from a negative judgment. The trial court found that the evidence did not entitle the Carstens to equitable relief. On appeal, this Court cannot review the sufficiency of the evidence to support the trial court's determination since a negative judgment may only be reversed for being contrary to law. In determining whether a negative judgment is contrary to law, this Court will not weigh the evidence nor resolve questions of credibility of witnesses. We will consider only the evidence most favorable to the appellees together with all reasonable inferences deducible therefrom. It is only when the evidence leads to but one conclusion, and the trial court has reached the opposite conclusion that we will reverse. Link v. Sun Oil Co. (1974), Ind.App., 312 N.E.2d 126; Lindenborg v. M & L Buiders and Brokers, Inc. (1973), Ind.App., 302 N.E.2d 816.

Both the waiver and estoppel arguments made by Midwest and the Carstens are based on the silence or acquiescence of the Eickhoffs. There is no assertion nor evidence of a false representation or concealment of material facts by the Eickhoffs. Mere silence on the part of the lessor is not a waiver unless he has a duty to speak. See Lavengood v. Lavengood (1947), 225 Ind. 206, 212, 73 N.E.2d 685. Also, for silence to give rise to equitable estoppel, there must be a duty to speak. Erie-Haven, Inc. v. First Church of Christ (1973), Ind.App., 292 N.E.2d 837, 842. The Eickhoffs had no duty to remind the Carstens of the notice requirement nor to inform the Carstens that...