McFerran v. Heroux
| Decision Date | 23 April 1954 |
| Docket Number | No. 32300,32300 |
| Citation | 44 Wn.2d 631,269 P.2d 815 |
| Court | Washington Supreme Court |
| Parties | McFERRAN, v. HEROUX et al. |
P. R. McIntosh, W. S. Lewis, Seattle, for appellant.
Reischling & Chan, Seattle, for respondents.
The grandstand at Aurora Stadium Speedway, north of Seattle, in King county, Washington, was destroyed by fire on the night of December 31, 1950. E. M. McFerran, the lessor of the premises on which the grandstand was located, brought this action against his lessees and the latter's assignees to recover damages sustained by reason of defendants' failure to comply with provisions of the lease, requiring a rebuilding of the grandstand. The lessee is Earl J. Heroux, and his assignees are Carl D. Payne and Bob Murray.
The grandstand in question was built in the early part of 1930, at a time when the premises were used as a dogracing track. Dog racing was later discontinued. In 1941, Heroux came into possession of the premises by virtue of a lease from Elsie Huntoon, the then owner. The grandstand was then the property of the Peterson Wrecking Company. Heroux purchased the grandstand from this company for $2500. Thereafter, heroux and McFerran, acting independently of each other, sought to purchase the real property in question from Elsie Huntoon. After considerable negotiations, and some litigation, certain conflicting claims of Heroux and McFerran were compromised. It was agreed that McFerran would purchase the real property and lease it to Heroux. Because of the compromise, the resulting lease contained several somewhat unique provisions.
The lease (executed on May 7, 1946,) is for a period of ten years (from January 1, 1946, to December 31, 1955). No rental payments were stipulated, it being recited that the consideration would consist of the payment of taxes by the lessee and his fulfillment of the covenants and agreements of the lease. Under the lease the grandstand and all other buildings and improvements then on the premises were classified as personal property; the lessee's ownership thereof was acknowledged, and it was agreed that the lessee had no duty to repair such buildings. There is no provision in the lease requiring the lessee to maintain fire insurance on the buildings, and no provision restraining assignment of the lease.
The suit before us revolves principally around the effect to be given to provisions of the lease which gave the lessor an option to purchase 'all buildings and improvements owned by the lessee,' for the rather nominal sum of $5,000 upon notification of intention to purchase not later than six months before termination of the lease. The option rights appear to have been a significant part of the consideration for the lease and, apparently in part at least, account for the fact that no rent was to be charged the lessee. The pertinent language of the lease reads as follows:
After execution of the lease, Heroux expended from $8,000 to $10,000 repairing and strengthening the grandstand. It was a covered wooden structure with a seating capacity of twenty-five hundred. It had indoor lavatories, offices, clubrooms, restaurant facilities, and storage space.
Heroux, although not obligated by the lease to insure the grandstand, nevertheless did so, and, after the fire, he collected $60,000 in fire insurance. He elected to rebuild the grandstand and he so notified McFerran in writing within thirty days after the fire, as required under the terms of the lease. A cleanup of the premises was undertaken immediately after the fire. However, before any reconstruction was commenced, Heroux assigned his interest in the lease to Carl D. Payne and Bob Murray.
Payne and Murray then erected two uncovered spectator stands. One had a seating capacity of twenty-five hundred. The other accommodated twelve hundred. About half of the seats were removable. Payne and Murray also built a separate structure about sixty feet behind these new stands, in which lavatories, concessions, and storage rooms were located. This building was about two hundred feet long and twenty feet wide, and made use of the water pipes and sewer connections of the original grandstand. About $25,000 (approximately one fourth of the estimated cost of rebuilding the destroyed grandstand) was expended in erecting the new stands and building just described.
On April 3, 1951, McFerran began this action. The theory advanced in his complaint is that the construction of the uncovered stands and the additional building did not constitute a rebuilding of the grandstand within the meaning of the lease. Alleging that Heroux, Payne and Murray had declared their intention not to rebuild the grandstand plaintiff McFerran asked for damages in the sum of $95,000.
The cause was tried without a jury. Evidence was introduced tending to show, and the court found, that the cost of rebuilding the grandstand immediately after its destruction would have been $103,633.66. No evidence was introduced and no finding was made as to the depreciation which would have occurred between the time of such rebuilding and the termination of the lease on December 31, 1955. There was no allegation, evidence, or finding to the effect that plaintiff had notified defendants of his intention to purchase the grandstand, or the newly built structures replacing it, at the expiration of the lease; or had tendered the $5,000 purchase price, as provided in the lease; or, that plaintiff would have exercised his option to purchase, but for the failure of Heroux and his assignees to rebuild the destroyed grandstand.
The trial court found that the new structures were not reproductions of the destroyed grandstand and were of less value, and concluded that there was a breach of the covenant to rebuild. However, the court concluded that the measure of damages was the present value of plaintiff's future right to exercise his option 'to purchase something which may not be in existence at the expiration of the lease;' furthermore, that there was no evidence as to the value of McFerran's future right to exercise his option, and that the matter of damages was purely speculative. Plaintiff was awarded nominal damages in the sum of one dollar. This appeal followed, plaintiff contending that a substantial judgment should have been entered in his favor. Defendants cross-appealed, contending that the trial court erred in finding that they had not substantially complied with the rebuilding requirement of the lease. Inasmuch as both parties have appealed, we will continue to refer to them as plaintiff and defendants.
This is a complex case. It requires a rather close analysis of the nature of an option contract.
Plaintiff's action is based upon allegations of a present and substantial breach of provisions of the lease contract, in which (1) the plaintiff leased certain premises to the defendant Heroux; (2) in part consideration therefor, the defendant agreed to sell to the plaintiff, at the end of the ten-year lease term, all improvements upon the premises (which, under the lease, were deemed his personal property) for the comparatively nominal sum of $5,000; and (3) defendant Heroux covenanted that, in the event of destruction of the improvements by the fire, he would (a) either surrender the lease, or, (b) rebuild the improvements within a reasonable time.
When, after the fire, Heroux gave written notice of his election to rebuild, the disjunctive covenants to surrender the lease, or to rebuild, became an absolute covenant to rebuild. Thereupon, defendants Payne and Murray, who were assignees of Heroux and were bound by his covenants, as stated above, proceeded to construct the new spectator stands, expending thereon some $25,000. As mentioned above, defendants in their cross-appeal contend that they have fulfilled their obligation to rebuild. Among other things, they point out that the new stands have a greater seating capacity; however, plaintiff-lessor contends that the structures are in other respects inferior to and quite unlike the original grandstand.
Although the defendants were not obliged to produce an exact replica of the original structure, they were obligated to build a new structure or structures reasonably similar in kind and proportions to the original construction. City of Seattle v. Northern Pacific R. Co., 12 Wash.2d 247, 121 P.2d 382. The trial court did not err in finding that defendants' failure to rebuild was a substantial breach of the lease. Although the failure to rebuild was a breach of a present duty, and provided a basis for legal proceedings to terminate the lease and to evict the tenant; nonetheless it is apparent that the plaintiff is much more interested in the breach insofar as it presently interferes with his option rights to purchase a grandstand, rebuilt substantially the same as the one that burned.
It has been suggested that this action was brought prematurely because, until the optionee exercises his option,...
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Table of Cases
...443, 486 P.2d 1093 (1971): 17.5(4)(e) McDuffie v. Noonan, 176 Wash. 436, 29 P.2d 684 (1934): 17.9(1), 17.11(3)(b) McFerran v. Heroux, 44 Wn.2d 631, 269 P.2d 815 (1954): 17.6(4)(a) McFreeze Corp. v. Dep't of Rev., 102 Wn.App. 196, 6 P.3d 1187 (2000): 12.6(3) McGary v. Westlake Investors, 99 ......