Morrison's Southern Plaza Corp. v. Southern Plaza, Inc.

• Decision Date: 08 April 1969
• Docket Number: Nos. 469S71,867A49,s. 469S71
• Parties: MORRISON'S SOUTHERN PLAZA CORPORATION, Morrison's Washington Street Corp., Appellants, v. SOUTHERN PLAZA, INC., Appellee.
• Court: Indiana Supreme Court

Page 191

246 N.E.2d 191

252 Ind. 109

MORRISON'S SOUTHERN PLAZA CORPORATION, Morrison's Washington Street Corp., Appellants, v. SOUTHERN PLAZA, INC., Appellee.

Nos. 469S71, 867A49.

Supreme Court of Indiana.

April 8, 1969.

Rehearing Denied May 20, 1969.

Eskenazi, Mitchell & Yosha, Sparrenberger, Duvall, Tabbert & Lalley, Indianapolis, for appellants.

Ben J. Weaver, Charles G. Reeder, Johnson, Weaver & Martz, Indianapolis, for appellee.

ON PETITION TO TRANSFER

HUNTER, Judge.

Petitioner, the owner of a shopping center, sued the respondent, the lessee, for back rent and common area costs under a written lease. In the third rhetorical paragraph of the complaint, the petitioner alleged:

'Pursuant to said lease the defendant Morrison's Southern Plaza Corporation took possession of said premises and has since and does still occupy the same under said lease.'

Respondent answered, specifically denying this allegation, and further asserting that the landlord had breached a provision in the lease which prohibited it from renting space to the lessee's competitors. Respondent also counterclaimed for damages alleged to have been sustained as a result of the landlord's breach. The petitioner replied denying that it had breached the restrictive provision in the lease.

The lease, which was introduced into evidence, contained the following restriction:

'The lessor agrees not to lease to, or permit use of leased space for, a woman's ready-to-wear store * * * excepting a store of no more than 6,000 square feet of the Gaytime Shop, Inc., or a substitute therefor.' (Our emphasis.)

The parties stipulated that the lessor had entered into a lease with Paul Harris, Inc., whose business volume was approximately two-thirds women's and children's wearing apparel. The petitioners contended that Paul Harris, Inc., had been a substitute for Gaytime, Inc., and the respondent contended that the lease with Paul Harris, Inc., constituted a material breach of the restrictive covenant.

The trial court made special findings of facts and conclusions of law including:

'21. That Paul Harris, Inc. is not a substitute for Gaytime Shops, Inc. within the terms and meaning of the Lease.'

'25. That the plaintiff has breached the Lease existing between Southern Plaza, Inc. and Morrison's Southern Plaza Corporation.'

'28. That by reason of the fact of the breach of said Lease by the Plaintiff, the Court finds that no attorneys' fees are allowable as against the said defendants for the bringing of this action by the plaintiff.'

From the above facts, the court reached the following conclusion of law:

'1. That the law on the question of the breach of the lease is with the defendant.'

Thus, the court found that the petitioner had violated the restrictive covenant by entering into a lease with Paul Harris, Inc. The court further found, however, that no material damages had been shown to have resulted from this breach:

'22. The defendants have not proved any damage as a result of the Lease from the Plaintiff to Paul Harris, Inc. or the occupation of space in the Southern Plaza Shopping Center by Paul Harris, Inc.'

'29. That by reason of the finding that no recovery of damages is made on the basis of the counterclaim of the defendant Morrison's Southern Plaza Corporation, no attorneys' fees are allowable on behalf of the counterclaimant as against the plaintiff.'

On the basis of these facts, the court concluded:

'2. That the law on the cross-complaint is with the plaintiff on the question of damages.'

The court found that the respondent had remained in possession of the premises and had become obligated for the reasonable rental value which the court further found to be the amount provided in the lease:

'26. That the defendant Morrison's Southern Plaza Corporation has elected to remain in possession of the premises which are the subject of such Lease.'

'27. That by reason of the defendant Morrison's Southern Plaza Corporation retaining possession of the premises it has obligated itself for the reasonable rental value of such premises and the Court further finds that a reasonable rental for such premises is as set out in said Lease.'

On the basis of these findings of facts, the court drew the following conclusions of law:

'3. That the plaintiff is entitled to recover the reasonable rental value of the premises occupied by the defendant and that the total accrued rent to the date of April 13, 1966 is in the amount of $37,867.05.

'4. That further, the plaintiff is entitled to recover the sum of $2,030.31 interest on the total accrued rent to the date of trial plus interest in the amount of 6% per annum from April 13, 1966 until paid.

The trial court apparently denied a recovery based on the written lease, but allowed the petitioner a restitutionery remedy for a benefit conferred.

Respondent filed a motion for a new trial on the following grounds:

'1. That the decision of the court is contrary to law.

2. Error in the failure to assess a recovery for the defendant, Morrison's Southern Plaza Corporation, against the plaintiff.

3. The assessment of the amount of recovery by the plaintiff against the defendant is erroneous, it being too large.

4. The Court erred in failing to grant an injunction enjoining the plaintiff from permitting Paul Harris, Inc. or any like organization to lease, use or occupy any part of the Southern Plaza Shopping Center.

5. That the decision of the Court is not sustained by sufficient evidence.'

The court overruled the motion for a new trial, and this ruling was assigned as error by the respondent. The Appellate Court reversed the judgment and gave two reasons for so doing:

1. The findings, conclusions and judgment of the trial court were 'not based upon the evidence adduced at the trial.'

2. '* * * the plaintiff cannot allege one cause of action and recover on proof of another unless there was an amendment to the complaint based upon the evidence and a clear showing that the amendment was not harmful to the defendant's defense.' Morrison's Southern Plaza Corp. v. Southern Plaza, Inc. (1968), 242 N.E.2d 636, 640.

A fair adjudication of this case requires a careful analysis of both of these statements.

Section 357 of The Restatement of Contracts sets forth the general rule as regards allowing restitution in favor of a party who is himself in default on a contract:

'(1) Where the defendant fails or refuses to perform his contract and is justified therein by the plaintiff's own breach of duty or non-performance of a condition, but the plaintiff has rendered a part performance under the contract that is a net benefit to the defendant, the plaintiff can get judgment, except as stated in Subsection (2), for the amount of such benefit in excess of the harm that he has caused to the defendant by his own breach, in no case exceeding a ratable proportion of the agreed compensation, if

(a) the plaintiff's breach or nonperformance is not wilful and deliberate; or

(b) the defendant, with knowledge that the plaintiff's breach of duty or non-performance of condition has occurred, or will thereafter occur, assents to the rendition of the part performance, or accepts the benefit of it, or retains property received although its return in specie is still not unreasonably difficult or injurious.

(2) The plaintiff has no right to compensation for his part performance if it is merely a payment of earnest money, or if the contract provides that it may be retained and it is not so greatly in excess of the defendant's harm that the provision is rejected as imposing a penalty.

(3) The measure of the defendant's benefit from the plaintiff's part performance is the amount by which he has been enriched as a result of such performance unless the facts are those stated in Subsection (1b), in which case it is the price fixed by the contract for such part performance, or, if no price is so fixed, a ratable proportion of the total contract price.' (Our emphasis.)

As applied to the facts in the case at bar, a restitution will lie for the petitioner if:

(1) The petitioner has rendered a part performance under the contract that is a net benefit to the respondent,

(2) The respondent, with knowledge of the breach, has accepted the benefit of the petitioner's part performance,

(3) The compensation sought is not merely a payment of earnest money, and,

(4) The contract does not provide that the respondent could retain the rent in the event of a breach by petitioner.

Respondent's staying in possession of the petitioner's premises is certainly enough of a benefit to satisfy the first two elements required for a restitutionery remedy. As regards that third element, the compensation sought by the petitioner is not merely earnest money. Finally, the contract does not provide that all rental payments may be withheld in the event of a breach of the restrictive covenant, but instead expressly provides the respondent should have three other alternative remedies:

'A breach of the within restrictions shall be the basis of concellation of the lease on the part of the Lessee as well as money damages or injunctive relief or any combination thereof. * * *' (Our emphasis.)

The recovery, according to the Restatement, should be based upon 'the price fixed by the contract for (the) part performance' which is 'in excess of the harm caused to the (respondent) caused by his own breach.' The trial court found that no harm had been caused to the respondent by the petitioner's breach of the restrictive covenant. Thus, it would seem that the facts found by the trial court in the case at bar, if they were sustained by sufficient evidence, would allow the petitioner in default, a restitutionery remedy.

Stipulation 7 reads as follows:

'Morrison's Southern Plaza, Inc. took possession of the demised premises on or about April 8, 1961, and has been in possession continuously since that date.'

The parties stipulated that the respondent had remained in possession of the premises, and...