Kiriakides v. United Artists Communications, Inc., 23993

Citation440 S.E.2d 364,312 S.C. 271
Decision Date03 November 1993
Docket NumberNo. 23993,23993
PartiesAlex KIRIAKIDES, Jr. and John Kiriakides, Appellants, v. UNITED ARTISTS COMMUNICATIONS, INC., Respondent. . Heard
CourtUnited States State Supreme Court of South Carolina

Edward M. Woodward, Jr. and Mark A. King, Jr., Woodward, Leventis, Unger, Daves, Herndon, and Cothran, Columbia, for appellants.

V. Clarke Price and James H. Cassidy, Love, Thornton, Arnold, and Thomason, Greenville, for respondent.

HARWELL, Chief Justice.

Alex and John Kiriakides (Landlord) contend that the trial judge erred in refusing to terminate the remainder of United Artists Communications' (United Artists) lease after United Artists failed to pay a rent increase. We disagree and affirm.

I. Facts

On January 15, 1976, Fairlane Litchfield Company Inc. entered into an agreement to lease a theater from Landlord until 1996. The lease was later amended to extend the term to 2016. Fairlane Litchfield assigned the lease to United Artists on May 15, 1987. In February 1988, Landlord discovered that United Artists had failed to pay a $365 per month rent increase 1 that took effect January 1, 1988 according to the terms of the lease. In May or June of that year, Landlord sent a letter to the local theater and to United Artists' office in New Jersey, the return address of all rent payments, rather than the New York address listed on the lease. Raymond Sohmer, the Administrative Assistant for United Artists, testified that he never received this letter in the New York office. United Artists continued to timely pay the amount due prior to the increase.

On February 9, 1989, Landlord sent a letter to United Artists stating that if payment of the past due rent was not made within ten days, Landlord was going to "regretfully exercise our rights under the lease." The letter was received in the New Jersey office on February 16 and in the New York office on February 17. United Artists tried to contact Landlord concerning the exact amount of rent due. Thereafter, Landlord's lawyer informed United Artists of the amount of past rent owed. United Artists immediately sent Landlord the past due amount.

On March 3, 1989, the same day that United Artists mailed the check for the past due amount, Landlord commenced this action for ejection by service of Summons and Complaint at United Artists' New Jersey office. United Artists answered, claiming that Landlord failed to serve notice of default as required by the terms of the lease and that termination of the lease would be inequitable. At trial, Landlord moved for a directed verdict claiming that the only reasonable inference to be drawn from the whole of the evidence was that the notice requirement had been met. The trial judge denied the motion and the jury rendered a verdict for United Artists. On appeal, the Court of Appeals held that the trial judge erred in failing to direct a verdict in Landlord's favor because proper notice was given to United Artists as a matter of law. The Court of Appeals remanded for a determination whether forfeiture of the lease would be inequitable, 307 S.C. 72, 413 S.E.2d 850.

On remand, the trial judge denied the forfeiture of the lease and ejectment of United Artists, ruling that upon payment of any past due installment of rent, United Artists shall resume possession of the premises. Landlord appealed.

II. Discussion

Landlord argues that because both the lease 2 and S.C.Code § 27-37-10 (1991) provide for termination of the lease if the tenant fails to pay rent when due, the trial judge erred in applying equitable principles to deny the forfeiture of United Artists' lease. We disagree.

Section 27-37-10 provides:

[t]he tenant may be ejected upon application of the landlord or his agent when (a) such tenant fails or refuses to pay the rent when due or when demanded, (b) the term of tenancy or occupancy has ended or (c) the terms or conditions of the lease have been violated.

According to Landlord, section 27-37-10 and the terms of the lease would permit forfeiture no matter how trivial, inadvertent, non-prejudicial, or technical the breach.

All rules of statutory construction are subservient to the one that the legislative intent must prevail if it can be reasonably discovered in the language used, and that language must be construed in the light of the intended purpose of the statute. Bohlen v. Allen, 228 S.C. 135, 89 S.E.2d 99 (1955). However plain the ordinary meaning of the words used in a statute may be, the courts will reject that meaning when to accept it would lead to a result so plainly absurd that it could not possibly have been intended by the Legislature or would defeat the plain legislative intention. Stackhouse v. Rowland, 86 S.C. 419, 68 S.E. 561 (1910). If possible, the court will construe the statute so as to escape the absurdity and carry the intention into effect. Id.

A majority of courts have concluded that a lease may not be forfeited for a trivial or technical breach even when the parties have specifically agreed that "any breach" gives rise to the right of termination. See Foundation Dev. Corp. v. Loehmann's, Inc., 163 Ariz. 438, 445, 788 P.2d 1189, 1196 (1990). These courts note the sophistication and complexity of most business interactions and are concerned that the possibilities for breach of a modern commercial lease are virtually limitless. In their view, the parties to the lease did not intend that every minor or technical failure to adhere to complicated lease provisions could cause forfeiture. Therefore, the majority of courts hold that to justify forfeiture, the breach must be material, serious, or substantial. Id.

Landlord's interpretation of section 27-37-10 would lead to the absurd result that leases could be terminated for immaterial and trivial breaches. In our view, the Legislature enacted section 27-37-10 to give the lessor a right not recognized at common law, the right to terminate a lease in the absence of a contractual provision. We do not find, however, that the Legislature intended this right to be unlimited. Therefore, we adopt the majority rule that the landlord's right to terminate is not unlimited and that the court's decision to permit termination must be tempered by notions of equity and common sense. Id. 163 Ariz. at 446, 788 P.2d at 1197. Accordingly, we hold that a forfeiture for a trivial or immaterial breach of a commercial lease should not be enforced. 3

To determine whether a breach of a commercial lease is material, the Arizona Supreme Court in Foundation Development applied the Restatement (Second) of Contracts § 241 (1981).

Id. Section 241 provides:

In determining whether a failure to render or to offer performance is material, the following circumstances are significant:

(a) the extent to which the injured p...

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