Reid v. Mutual of Omaha Ins. Co.

• Decision Date: 12 June 1989
• Docket Number: No. 19678,19678
• Parties: Mervin R. REID and Ethna R. Reid, Plaintiffs and Appellees, v. MUTUAL OF OMAHA INSURANCE COMPANY and United Benefit Life Insurance Company, Defendants and Appellants.
• Court: Utah Supreme Court

Page 896

776 P.2d 896

Mervin R. REID and Ethna R. Reid, Plaintiffs and Appellees, v. MUTUAL OF OMAHA INSURANCE COMPANY and United Benefit Life

Insurance Company, Defendants and Appellants.

No. 19678.

Supreme Court of Utah.

June 12, 1989.

Rehearing Denied July 11, 1989.

Jack L. Schoenhals, Salt Lake City, for defendants and appellants.

Reid Tateoka, Salt Lake City, for plaintiffs and appellees.

ZIMMERMAN, Justice:

Mutual of Omaha ("Mutual") appeals from a judgment in a nonjury trial finding it liable to Mervin and Ethna Reid ("the Reids") for breach of a lease for office space. Mutual contends that the trial court erred in rejecting its claim that the Reids had constructively evicted Mutual and that it also erred in calculating the damages due the Reids. We affirm the judgment of liability for breach of the lease but reverse in part on the determination of damages.

In September of 1980, Mutual, as tenant, and the Reids, as landlord, entered a five-year lease agreement for office space at a monthly rate of $1,100. The lease term was to end in October of 1985. Mutual took possession of the premises, which it used to conduct an insurance sales business. Soon afterward, another tenant moved into adjoining space in the building. The other tenant, Intermountain Marketing ("Intermountain"), operated a door-to-door cookware sales business and used its office space to train its large sales force. Mutual made numerous complaints to the Reids that Intermountain's personnel were excessively noisy, occupied all of Mutual's parking spaces, and otherwise interfered with Mutual's business. Mutual felt that the Reids did not respond adequately to the frequent complaints and, in February of 1982, gave notice and vacated the premises. In April of 1982, the Reids filed suit, claiming that Mutual had breached the lease and was liable for the monthly rental for the three and a half years remaining on the five-year term. Mutual counterclaimed, contending that it had been constructively evicted by the Reids' failure to control the activities of Intermountain. While the litigation was proceeding, the Reids remodeled the premises at issue and leased them to Intermountain for the remainder of the five-year term at a rate comparable to what Mutual had been paying. However, in November of 1982, Intermountain vacated and declared bankruptcy; from that point through the date of trial, the premises were left vacant.

A bench trial was held in July of 1983. After hearing extensive evidence, the court found against Mutual on its counterclaim for constructive eviction, concluding that the noisy conditions were not sufficiently disruptive to amount to a constructive eviction. The court found that Mutual had breached the lease agreement and awarded the Reids damages under the terms of the agreement. These consisted of the total of the unpaid rents, including both those that had accrued through the date of trial and those that would accrue from the date of trial through the end of the lease term in 1985, less rents actually received from Intermountain during the time it occupied the Mutual premises, plus the costs of reletting and attorney fees. ¹

Before this Court, Mutual attacks the trial court's failure to find for it on the constructive eviction counterclaim. In the event that challenge fails, Mutual contends that the trial court erred in calculating the damages due from mutual to the Reids.

Mutual's attack on the trial court's constructive eviction ruling has two prongs. First, it contends that the trial court's findings of fact regarding the disruptiveness of Intermountain's behavior are inadequate to support its legal conclusion because they lack the necessary specificity. Second, Mutual claims that the trial court's findings and its resulting conclusion that a constructive eviction had not occurred lack evidentiary support.

We first address the challenge to the specificity of the findings of fact. Rule 52(a) of the Utah Rules of Civil Procedure requires the judge in a bench trial to "find the facts specially and state separately its conclusions of law thereon." Utah R.Civ.P. 52(a). The failure to enter adequate findings of fact on material issues may be reversible error. See, e.g., Acton v. J.B. Deliran, Corp., 737 P.2d 996, 999 (Utah 1987). The findings must be articulated with sufficient detail so that the basis of the ultimate conclusion can be understood. See, e.g., id. at 999; Smith v. Smith, 726 P.2d 423, 426 (Utah 1986); Rucker v. Dalton, 598 P.2d 1336, 1338-39 (Utah 1979).

Here, although the findings of fact entered by the trial court are not a model of clarity, we conclude that they are adequate. The findings satisfactorily express the trial court's determination as to the nature of the activities carried on by Intermountain in the space adjacent to Mutual's and its determination that the noise and other annoyances were not so egregious as to render the premises unsuitable for their intended use, as is required for a claim of constructive eviction. See, e.g., Brugger v. Fonoti, 645 P.2d 647, 648 (Utah 1982); see generally Backman, Landlord-Tenant Law: A Perspective on Reform in Utah, 1981 Utah L.Rev. 727, 740 [hereinafter Backman, 1981 Utah L.Rev.]; 2 R. Powell, The Law of Real Property, Landlord and Tenant Estates p 232 (1988). The findings are also sufficiently detailed to reveal the trial court's reasoning processes. Therefore, the findings meet the requirements of rule 52(a).

We next address Mutual's claim that the findings and the resulting conclusion that there was no constructive eviction are not adequately supported by the evidence. To mount a successful challenge to the correctness of a trial court's findings of fact, an appellant must first marshal all the evidence supporting the finding and then demonstrate that the evidence is legally insufficient to support the findings even in viewing it in the light most favorable to the court below. In re Estate of Bartell, 776 P.2d 885 (Utah 1989) (mem op.); State v. Mitchell, 769 P.2d 817 (Utah 1989); Scharf v. BMG Corp., 700 P.2d 1068, 1070 (Utah 1985). The legal sufficiency of the evidence is determined by the standard set out in civil rule 52(a), which provides: "Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses." Utah R.Civ.P. 52(a). This "clearly erroneous" standard applies whether the case is characterized as one in equity or one in law. See Barker v. Francis, 741 P.2d 548, 551 (Utah Ct.App.1987); see also Ashton v. Ashton, 733 P.2d 147, 150 & n. 1 (Utah 1987). A finding attacked as lacking adequate evidentiary support is deemed "clearly erroneous" only if we conclude that the finding is against the clear weight of the evidence. In re Estate of Bartell, 776 P.2d at 886; State v. Mitchell, 769 P.2d at 818; see Western Kane County Special Serv. Dist. No. 1 v. Jackson Cattle Co., 744 P.2d 1376, 1377 (Utah 1987); State v. Walker, 743 P.2d 191, 192-93 (Utah 1987).

Here, the evidence provides adequate support for the findings. We certainly cannot say that they are against the clear weight of the evidence, especially when we give "due regard" to the trial court's opportunity to assess the credibility of the numerous witnesses called by each party. Because the court's conclusion of law on the constructive eviction issue is fully supported by these findings, Mutual's arguments on this issue are rejected, and we affirm the determination that Mutual breached the lease agreement by vacating the premises and failing to pay rent after February of 1982.

Mutual next argues that even if the trial court properly rejected its constructive eviction claim and found it to have breached the lease, the Reids were entitled only to damages for nonpayment of rents measured by those rents that came due between the date of Mutual's last payment and the date of the reletting to Intermountain. Mutual contends that the trial court erred when it included in the measure of damages the unpaid rents that accrued after this reletting.

In support of this argument, Mutual relies upon the common law doctrine of "surrender and acceptance." Under that doctrine, when a tenant surrenders the premises to a landlord before a lease term expires and the landlord accepts that surrender, the tenant is no longer in privity of estate with the landlord and therefore has no obligation to pay any rents accruing after the date of the acceptance. See, e.g., Frisco Joes, Inc. v. Peay, 558 P.2d 1327, 1330 (Utah 1977); Willis v. Kronendonk, 58 Utah 592, 597-98, 200 P. 1025, 1027-28 (1921). See generally Backman, 1981 Utah L.Rev. at 737-39; 49 Am.Jur.2d Landlord and Tenant §§ 619-25 (1970); I American Law of Property § 3.99 (Casner 1952); Restatement (Second) of Property § 12.1 (1977). Phrased in contract law parlance, the lease is treated as having been rescinded or terminated by mutual agreement. ² See Humbach, The Common-Law Conception of Leasing: Mitigation, Habitability, and Dependence of Covenants, 60 Wash. U.L.Q. 1213, 1237-41 (1983). Mutual contends that this common law doctrine was applicable under the terms of the lease agreement. It then argues that the Reids' actions in remodeling the premises and reletting them to Intermountain amounted to an acceptance of surrender that relieved Mutual of its obligation to pay further rents.

At common law, the critical issue in applying the doctrine of surrender and acceptance is determining whether the landlord intended to accept the surrender. This intention may be express or implied. See Frisco Joes, 558 P.2d at 1330; Mariani Air Prods. Co. v. Gill's Tire Mkt., 29 Utah 2d 291, 293, 508 P.2d 808, 810 (1973); Belanger v. Rice, 2 Utah 2d 250, 272 P.2d 173 (1954); 2 R. Powell, The Law of Real Property p 249 (1988). The lease agreement between the Reids and Mutual deals specifically with the...