Johnson v. Northwest Acceptance Corp.

• Decision Date: 19 May 1971
• Citation: 485 P.2d 12,259 Or. 1,92 Adv.Sh. 1045
• Parties: Charles F. JOHNSON et al., Respondents and Cross-Appellants, v. NORTHWEST ACCEPTANCE CORPORATION, a Corporation, Appellant and Cross-Respondent.
• Court: Oregon Supreme Court

Page 12

485 P.2d 12

259 Or. 1

Charles F. JOHNSON et al., Respondents and Cross-Appellants, v. NORTHWEST ACCEPTANCE CORPORATION, a Corporation, Appellant and Cross-Respondent.

Supreme Court of Oregon.

Argued and Submitted April 6, 1971.

Decided May 19, 1971.

Dennis F. Todd, Portland, argued the cause for appellant and cross-respondent. With him on the briefs were Richard M. Sandvik, and Smith, Todd & Ball, P.C., Portland.

Denton G. Burdick, Jr., Portland, argued the cause for respondents and cross-appellants. With him on the brief were Frank H. Hilton, Jr., and Hutchinson, Schwab & Burdick, Portland.

Beforre McALLISTER, P.J., and DENECKE, HOLMAN, TONGUE, HOWELL and BRYSON, JJ.

DENECKE, Justice.

This appeal is from a judgment for plaintiffs after a trial to the court on an action for damages arising from the breach of a lease agreement.

In 1965 plaintiffs owned the land and building on the corner of S. W. Main and Broadway Streets in Portland, Oregon. Ed Lee, Inc., leased the property and operated a night club on the premises. Defendant made a substantial loan to the lessee and as security held an interest in certain fixtures and equipment in the building. As additional security defendant obtained from Ed Lee, Inc., an assignment of its lease. It also secured from plaintiffs a consent to the assignment of the lease and a release and waiver of any interest in the fixtures and equipment used as collateral.

By December 1965 Ed Lee, Inc., was in default on both the lease and its loan obligation with defendant. Defendant closed the premises on December 7, 1965, and gave notice of its intent to conduct a sale under ORS Chapter 79 to foreclose its security interest. Plaintiffs wrote to defendant on December 14, 1965, and stated that under the terms of the consent to assignment defendant was liable for the fair rental value of the premises as logn as it controlled the building. Defendant then held the sale and purchased the collateral for $10,000.

Subsequently plaintiffs offered to waive any rent obligation so long as defendant would leave the equipment and fixtures in the building. Plaintiffs made this request in order to facilitate reletting the premises as a 'complete package' to a new tenant. Defendant agreed. There followed a number of serious but unsuccessful attempts to relet. Finally on April 12, 1966, defendant notified plaintiffs that it could no longer cooperate in attempts to relet and that it intended to conduct an auction on the premises to dispose of its property. Plaintiffs then made a second demand for rent commencing April 13, 1966, 'at the rent specified in the lease.'

As the date of the auction approached plaintiffs sought and received assurances that defendant would only sell its property and not any of that belonging to plaintiffs. Defendant held the auction in late May. The keys to the premises, however, were not returned to plaintiffs until July 12, 1966.

Plaintiffs commenced this action in early 1967. The final complaint stated a count for rent and a count for waste. The trial court awarded $3,000 in back rent, $29,448 in damages for waste and $8,000 in attorneys' fees based on a prevailing party provision in the lease.

The first assignment of error we will consider concerns the award of attorneys' fees. The trial court in its oral decision stated that plaintiffs were entitled to attorneys' fees because a landlord-tenant relationship existed between April 13 and July 12, 1966. In its Conclusions of Law the court based the award on paragraph 31 of the lease which allowed the prevailing party to recover attorneys' fees in actions arising under the lease. The trial court apparently concluded that because defendant was a tenant all the provisions of the lease applied.

We do not agree with this conclusion in light of the clear meaning of the consent to assignment executed by plaintiffs. It stated in part:

'The undersigned hereby consent to the attached assignment from Ed Lee, Incorporated to Northwest Acceptance Corporation as Assignee, and agree that so long as said Assignee has not exercised dominion over the premises covered by said lease of July 16, 1965, for the purpose of operating the business of Ed Lee, Incorporated, or other business, Assignee shall not be liable for rent or for any other obligation of the original tenants or of Ed Lee, Incorporated, on account of said lease, provided, however, that Assignee shall in all events be liable for the fair rental value of such premises, as established by said lease, during any period during which Assignee shall exercise dominion over such premises for any purpose whatever.'

We interpret this language to mean that defendant was to be subject to the covenant for rent and the other provisions of the lease if it used the premises for the same business as Ed Lee, Inc., or for some other business, but if defendant used the premises for any other purpose it would only be liable 'for the fair rental value of such premises, as established by said lease.' In this case it is established that defendant did not use the premises for a night club or any other business but rather only to store and auction personal property. It follows, therefore, that under the terms of the consent paragraph 31 of the lease should not apply.

Plaintiffs' principal argument in support of the attorneys' fees is that defendant stipulated that the court could award them as provided in paragraph 31 of the lease. It is true that in the opening moments of trial defendant made the following statement:

'MR. SMITH: Your Honor, we have a two- away (sic) attorney fee provision in the lease, which I would suggest at this time, if it is agreeable to Mr. Campbell, we stipulate that the Court set reasonable attorneys' fees as it sees fit, and that would eliminate the need to amend either of the pleadings.'

Defendant made this statement as plaintiffs were attempting to amend the second amended complaint to provide for attorneys' fees. It is apparent from the final phrase that defendant made the stipulation in an attempt to facilitate the proposed amendment. The problem is to determine the precise extent of the stipulation.

It is well recognized that the language of a stipulation, whether it be an agreed statement of facts or related to other matters, will not be so construed as to give it the effect of a waiver of a right not plainly intended to be relinquished. State Highway Com. v. Feves, 228 Or. 273, 284--285, 365 P.2d 97 (1961). Under this rule of construction plaintiffs must establish that defendant plainly intended to waive its defense that paragraph 31 of the lease did not apply in this case.

As noted defendant's immediate reason for making the stipulation was to facilitate the proposed amendment. This purpose suggests that defendant was not intending to settle any legal questions concerning the application of the documents involved in the case, but rather was only attempting to help dispose of preliminary matters. Moreover, a few minutes later during opening statement defendant argued specifically that it was not subject to any obligations under the lease because of the consent to assignment. It is difficult to reconcile this argument with the suggested interpretation of the stipulation. Finally the trial judge on the day he gave his verdict characterized the stipulation as following the judge to decide the amount to be awarded without expert testimony provided attorneys' fees were to be awarded. Plaintiffs agreed with the judge's characterization. The fact that there was some question as to whether attorneys' fees were to be given indicates that the judge did not interpret defendant's statement as a concession that paragraph 31 applied. For these reasons we conclude that defendant's oral, in-court statement should be construed to stipulate only that if the full lease applied then the court could award the prevailing party attorneys' fees pursuant to paragraph 31. Since we have determined that under the consent agreement paragraph 31 did not apply in this case it was error to award attorneys' fees.

The next specification concerns the adequacy of the complaint. Part of the damages awarded for waste included the cost of replacement of plaintiffs' fixtures removed by defendant. Defendant concedes the recovery is proper in an action for waste but contends that plaintiffs did not allege this injury and it was, therefore, improper to award damages.

In the original complaint plaintiffs had a count alleging the wrongful sale of their property and another count for damage to the premises. The amended complaint dropped the count for wrongful sale. Paragraphs V and VI of the second cause of action in the amended complaint stated:

'V.

'During its occupancy of the said premises from April 13 to July 16, 1966, defendant prepared for sale and sold personal property and fixtures from the said premises.

'VI.

'In the course of preparing for and selling the said personal property and fixtures, defendant ripped, tore and cut away many of said fixtures from the partitions, floors, ceilings and walls of said building, and extensively damaged the partitions, floors, ceilings and walls and failed to repair said damage as they were required to do by the terms of said lease, to plaintiffs' damage in the amount of $14,500.00. The reasonable cost of repairing said damages is $14,500.00.'

While these allegations did mention ripping, cutting away and selling fixtures, they did not specify that the fixtures sold belonged to plaintiffs.

The morning of trial plaintiffs moved to amend the complaint by increasing the damages for waste to $30,000 and adding a claim for attorneys' fees. At this time plai...