Lee v. Durango Music

• Citation: 355 P.2d 1083,144 Colo. 270
• Decision Date: 17 October 1960
• Docket Number: No. 18388,18388
• Parties: John A. LEE, Plaintiff in Error, v. DURANGO MUSIC, a copartnership composed of A. C. Ruland and Lillian D. Ruland, Defendant in Error.
• Court: Supreme Court of Colorado

Page 1083

355 P.2d 1083

144 Colo. 270

John A. LEE, Plaintiff in Error, v. DURANGO MUSIC, a copartnership composed of A. C. Ruland and Lillian D. Ruland, Defendant in Error.

No. 18388.

Supreme Court of Colorado, In Department.

Oct. 17, 1960.

Rehearings Denied Oct. 31, 1960.

Fairfield & Woods, Charles J. Beise, Denver, for plaintiff in error.

Emigh & Emigh, Durango, for defendant in error.

FRANTZ, Justice.

Lee suffered adverse judgments on two claims asserted against him in one complaint. These claims arose out of the relationship of landlord and tenant. The first claim was based upon an alleged loss of business and damages sustained by the tenant, and the second upon alleged expenses to which the tenant was put in removing from the leased premises.

Judgment in the sum of $3,724.03 was entered on the first claim, and in the sum of $3,529.91 on the second, conformable to verdicts returned by the jury.

Lee was the landlord and A. C. Ruland and Lillian D. Ruland, who operated a partnership under the name of Durango Music Store, were the tenants. On the 30th day of April, 1953 they entered into a written lease for a two-story building in Durango for a term commencing June 1, 1953 and ending June 1, 1956. A rental of $200 per month was to be paid for the premises. Copies of the lease were in possession of both parties.

Since 1946 the Rulands had been 'engaged in a complete music store and electrical appliance business' in this building. At the time in question the second floor was used by the tenants for the display and storage of second-hand equipment and used motors.

In the latter half of February 1955, Lee entered into negotiations for the letting of the upper floor, culminating during the last days of the month in a 'commitment' by Lee and an acceptance by the Atlantic Refining Company. A written lease was executed by Mr. and Mrs. Lee and the Atlantic Refining Company, dated March 25, 1955, and in order to comply with the terms thereof, the Lees were required to make major alterations in the structure.

It appears that, after the 'commitment' and acceptance, Lee advised Mr. Ruland of the new tenancy arrangement for the upper floor. Ruland protested, telling Lee that he was operating an expanding business and needed the space of the entire building. However, both in the pleadings and in the testimony, it is clear that Lee and the Rulands entertained an honest but mistaken belief that the written lease between them had expired and that the Rulands were occupying the premises on a month to month basis. This impression apparently existed at the time that Lee informed Ruland of the new lease of the second floor and continued until May 19, 1955.

Based upon this mutual mistake between Lee and the Rulands, Lee told the Rulands that they were to occupy the ground floor and would be charged a rental of $150 per month. No disagreement over this new arrangement for the ground floor was expressed by the Rulands, although they let Lee know that they were unhappy with it.

Major structural changes of the premises were commenced on March 1, 1955. A few days thereafter, the Rulands removed the appliances and other equipment from the second floor, storing some of the wares in their garage at home and others on the first floor.

As a result of the work involved in alteration of the premises, the Rulands had to operate their business under adverse conditions. They had to contend with noise caused by power tools and by hammering and chiseling. Considerable dust resulted from the activities of the workmen remodeling the second floor and part of the first floor. Dust was a problem, because of its effect upon the fine finishes of pianos, organs, and other musical instruments and upon the mechanisms thereof. The remodeling operation, insofar as it affected Atlantic Refining Company was completed about the middle of May, 1955.

On May 19, 1955, Mr. Ruland discovered that the written lease under which they occupied the property did not expire until June 1, 1956. Immediately upon discovering their mistake as to the date of expiration of the lease Ruland advised Lee thereof. The Rulands had paid rent for the months of March, April, May and June at the rate of $150 per month, the last such payment on June 4, 1955, fifteen days after the discovery of the error as to the expiration date of the written lease.

This last payment was made by Mrs. Ruland, one of the copartners, (whether with knowledge of the error is not clear), and when Ruland learned that this payment had been made, he tendered to Lee an additional $200 to make up the difference between $200 and $150 for the months of March, April, May and June. This tender was rejected by Lee, and the contemplated remodeling of the ground floor, involving the portion being occupied by Ruland, apparently was not undertaken.

According to Ruland, he and his wife commenced looking for another location after Lee commenced remodeling the upper floor. In June 1955 they obtained a new location, and they commenced business in the new store on August 15, 1955.

The Rulands shortly thereafter filed this action against Lee. By their first claim, they sought damages for loss of business and their inability to carry on a normal business, said to result from the remodeling operation; by their second count they alleged an eviction resulting from the deprivation of space in the leased premises, causing them expense in removing to new premises.

Lee by answer alleged an oral agreement modifying the original lease; waiver on the part of the Rulands in having accepted the remodeled building under the terms and conditions of the modified agreement; estoppel to assert an eviction, the Rulands having accepted the reduction in rent and permitted the expenditure by Lee of large sums of money in remodeling the premises. Lee counterclaimed for $300 as rental for the months of July and August 1955.

The Rulands by reply to the first defense alleged mutual mistake as to the term of the lease and their attempt to pay the full rental of $200 per month after the discovery of the error; that they did not agree to a change in the lease, and that if a modification arose it was the result of fraud by Lee in leading the Rulands to believe that the lease had expired.

As grounds for reversal, Lee asserts (A) that an estoppel applies against the Rulands, and rests his contention in this respect on five stated reasons; and that

'B. The verdicts of the Jury on Rulands' first and second causes of action are excessive because Rulands, with a duty to minimize their damages, failed to give notice to Lee of any alleged damages caused by the remodeling, and Lee could have avoided all such damage had he received notice.

'C. The verdicts of the Jury are improper because proof of loss of gross profits does not form a proper basis for a verdict awarding damages for loss of profits, and no evidence was adduced to show the expenses of doing business.'

Lee in his pleading, his proof, and in his instruction submitted to the trial court, espoused a theory of estoppel based upon the mutual mistake of the parties in believing that the lease had expired and that their acts ensued in consequence thereof. Rulands' surrender of the upper floor, the reduction in rent and its payment, the expenditures by Lee of large sums of money in remodeling, the leasing of the second floor of the premises to Atlantic Refining Company, and other acts, are stressed as showing a changed position making properly invocable the doctrine of estoppel and its kindred canon, acquiescence.

May either party rely on an estoppel when they act in consequence of a mutual mistake regarding their rights? Ordinarily, a mutual mistake as to facts does not generate an estoppel. Rockwood v. U. S., 39 F.2d 984, 69 Ct.Cl. 524. And it has been held that the conduct of parties resulting from a mutual mistake of their legal rights under an instrument does not inter partes create an estoppel. Busby v. Busby, 137 Iowa 57, 114 N.W. 559; New York Life Ins. Co. v. Talley, 5 Cir., 72 F.2d 715.

Moreover, Lee would have us apply the doctrine of estoppel because the 'Rulands as a matter of law are conclusively presumed to know the expiration date of the lease.' Unfortunately for Lee, this presumption, if applicable, like the Roman deity Janus faces both ways. One face is directed toward Lee, the other toward the Rulands. But we believe it to be sound doctrine, applicable to this case, that where 'both parties * * * have the same means of ascertaining the truth, there can be no estoppel.' Crabtree v. Winchester, 108 Tenn. 403, 67 S.W. 797, 799.

Lee might have found anchorage for an estoppel or an acquiescence in the testimony that a payment of $150 was made by Mrs. Ruland on June 4, 1955, fifteen days after Mr. Ruland read the lease and learned that it had not expired. Although this factor is mentioned in the briefs, the theory of Lee as revealed by his pleadings, his evidence and tendered instructions was basically founded on the mutual mistake of the landlord and his tenants and what they did in the light of this mutual mistake.

Ordinarily the knowledge of Mr. Ruland concerning the expiration date of the lease would be imputed to his partner, Mrs. Ruland, and her act in making a payment of $150 after the acquisition of this knowledge would present a question of acquiescence in the new arrangement. Knowledge of one...