Geisdorf v. Doughty

Decision Date19 June 1998
Docket NumberNo. 970181,970181
Citation972 P.2d 67
Parties345 Utah Adv. Rep. 16 William H. GEISDORF, an individual, and Valline Gallery Framing, Inc., a Utah corporation, dba The Family Jewels/White Wolf Gallery, Plaintiffs, Appellees, and Cross-Appellants, v. Mary DOUGHTY, an individual, The Family Jewels, Inc., a Utah corporation, and Doughty/Schwertfeger Enterprises, L.C., a Utah Limited Liability Company, Defendants, Appellants, and Cross-Appellees.
CourtUtah Supreme Court

Joseph E. Tesch, Tracey Paul, David B. Thompson, Park City, for plaintiffs.

David M. Eckersley, Salt Lake City, and Janet A. Goldstein, Park City, for defendants.

HOWE, Chief Justice:

Defendant Mary Doughty appeals from a judgment entered against her and in favor of plaintiff William H. Geisdorf stemming from a dispute over a lease agreement between the parties. Doughty contends the trial court erroneously stated the law in the jury instructions. She seeks (1) reversal of the judgment entered below on the jury verdict and (2) a new trial to address her counterclaim. Geisdorf cross-appeals, seeking a remand to the trial court for clarification and resolution of his claim against Doughty for an alleged breach of contract.

BACKGROUND

In August of 1992, William Geisdorf and Mary Doughty negotiated for the sale of her jewelry business, known as "The Family Jewels," and for the lease of a portion of her building located at 591 Main Street in Park City, Utah, where Geisdorf intended to continue to operate that business. Both the Purchase Agreement and the Lease Agreement between the parties took effect on September 1, 1992.

The Lease Agreement provided for a basic term of three years, to expire on August 31, 1995, and for two options to renew for two additional terms of five years each. This "Options of Renewal" clause [hereafter "the Renewal Clause"] is the source of the parties' disagreement. The Renewal Clause reads, in pertinent part:

Lessee shall have two options to renew this lease for a period of five additional years each. Written notice of intention to renew must be furnished Lessor at least four (4) months prior to expiration of the lease or any renewal hereunder and this lease must not then be in default or have been routinely in default during the prior term.

For the majority of the basic term, the parties had a good, cordial business relationship. Difficulties were minor and generally were handled through "informal" meetings. In January 1995, Doughty visited Geisdorf in one of these "informal" meetings and offered him a tentative payment plan for the coming year. This plan included a rent payment schedule for those payments that would come due if Geisdorf chose to renew the lease. The April 30 deadline for exercising the option passed; Doughty received no written notice of Geisdorf's intention to renew. Sometime in early July, Doughty met with the manager of The Family Jewels to discuss plans to paint the building at the end of July, including a proposal that Geisdorf would be responsible for paying a portion of the painting costs. Soon thereafter the tenor of the parties' business relationship changed.

On July 15, 1995, Doughty, having not received the written notice required by the Lease Agreement concerning exercise of the option, sent a letter to Geisdorf. This letter read:

It has been brought to my attention that we have not received notice of your intentions regarding renewal of the rental space located at 591 Main Street. The terms of the present lease will expire on August 31, 1995. Your option to renew the present lease has expired (Section 14 [of the Lease Agreement] ). If you wish to remain in the space we will need to renegotiate as soon as possible.

Doughty made a handwritten note at the bottom of the letter requesting a prompt response. Geisdorf answered with a letter dated July 24, 1995, which read in pertinent part, "This is in response to your letter regarding renewal of the lease on 'The Family Jewels.' ... Please use this as a confirmation of my verbal intention to renew the lease as per the original agreement."

As the time for exercising the option had elapsed nearly two months earlier, Doughty initiated negotiations with Geisdorf for a new lease. These negotiations soon proved fruitless as Geisdorf steadfastly maintained his right as lessee to remain in the building. In August 1995, Geisdorf filed this action claiming that "under the circumstances, he had exercised his option to renew the lease" and Doughty responded by serving Geisdorf with a notice to quit as provided for in section 17 of the Lease Agreement, which reads in pertinent part:

was therefore legally entitled to remain on the premises as lessee under the first five-year renewal term.

HOLDING OVER: If Lessee holds possession of the premises after the term of this lease, Lessee shall become a tenant from month-to-month on the terms herein specified ... and Lessee shall continue to be a month-to-month tenant until the tenancy shall be terminated by Lessor, or until Lessee has given to Lessor a written notice ... of his intention to terminate the tenancy.

(Emphasis added.) Doughty also closed the bank account to which Geisdorf had been making rent payments.

Geisdorf remained obdurate in the face of the notice to quit and subsequent proceedings to evict him from the premises. In October, November, and December of 1995, he deposited rent payments to Doughty's closed bank account, which the bank mistakenly accepted but later returned to Geisdorf. Two of the deposits were returned along with a letter dated December 5, 1995, explaining, in part, that the deposits had been "erroneously accepted" for an account "closed by the customer on September 28, 1995" and requesting that no further deposits be made.

In February 1996, Geisdorf complained of a water leak in the ceiling of the store that had damaged ceiling tiles, walls, and merchandise. Geisdorf requested that Doughty take care of it based on section 7 of the Lease Agreement that stipulated: "Lessor shall be responsible for all structural repairs and repairs or replacement of the roof." Doughty had the ice build-up removed from the roof, but would not repair any interior damage, since "[she] didn't feel it was her responsibility ... [b]ecause Mr. Geisdorf had already been served with a notice of eviction, and he was [remaining] there unlawfully."

In April of 1996, Doughty filed a counterclaim against Geisdorf for unlawful detainer. The case went to trial and a jury returned findings in favor of Geisdorf. In harmony with the jury's findings, the court adjudged that Geisdorf was to "remain in the leased premises during the first option period, September 1, 1995, through August 31, 2000, pursuant to the Lease Agreement." Additionally, pursuant to the jury's finding that Doughty had breached the Lease Agreement, the court awarded Geisdorf $2,905 in damages. Doughty now appeals and requests that we reverse the trial court's judgment for Geisdorf and remand this case for further proceedings to grant her relief on her counterclaim. She contends that the trial court erroneously instructed the jury that "substantial compliance" with the renewal option is sufficient to constitute an exercise thereof. Furthermore, she maintains that at no time did her conduct meet the requirements necessary for waiver and that the jury's finding of waiver by her was not supported by the evidence. Geisdorf cross-appeals, contending that the trial court did not adequately address an alleged breach of the Lease Agreement. At trial, Geisdorf requested that the court require the jury to specifically determine whether Doughty's "failure to replace the north facing building sign [was] a breach of the agreement." The court declined, electing instead to ask the jury whether "Doughty breached any term of the lease agreement" and "what damage, if any, was caused by such breach." He now asserts error in the trial court's instructions, claiming ambiguity regarding his asserted breach and the damages arising therefrom. He requests a remand for clarification on this issue.

DISCUSSION

The court instructed the jury, in part, to decide whether (1) "Geisdorf substantially complied with the lease's notice of renewal provision"; (2) "Doughty distinctly manifested an intent to waive her right to receive written notice"; and (3) "Geisdorf relied upon any distinct waiver ... when he failed to give written notice of his exercise of his option." The jury found for Geisdorf in each instance. The issue of whether substantial compliance with the renewal clause is sufficient to constitute an exercise thereof is a question of law which this court reviews for

correctness, see United Park City Mines Co. v. Greater Park City Co., 870 P.2d 880, 885 (Utah 1993), and to which this court gives no deference. See Zoll & Branch, P.C. v. Asay, 932 P.2d 592, 593 (Utah 1997); State v. Anderson, 929 P.2d 1107, 1108 (Utah 1996). The issue of waiver is a question of fact; when examining jury verdicts such as these, "we 'review the evidence and all inferences which may be reasonably drawn from it in the light most favorable to the verdict,' " State v. Alvarez, 872 P.2d 450, 459 (Utah 1994) (quoting State v. Hamilton, 827 P.2d 232, 236 (Utah 1992)), and reverse the lower court only when "we conclude that the evidence is insufficient to support the verdict." Scudder v. Kennecott Copper Corp., 886 P.2d 48, 52 (Utah 1994).

I. SUBSTANTIAL COMPLIANCE

The initial question we address is one of "substantial" compliance versus "strict" compliance. Specifically, we must decide whether it was error for the trial court to instruct the jury that Geisdorf was only required to substantially comply with the Renewal Clause. We look first to the pertinent language of that clause which provides: "Lessee shall have two options to renew this lease for a period of five additional years each. Written notice of intention to renew must be furnished Lessor at...

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