Rialto Theatre, Inc. v. Commonwealth Theatres, Inc., s. 84-162

• Decision Date: 03 February 1986
• Docket Number: Nos. 84-162,84-163 and 84-233,s. 84-162
• Citation: 714 P.2d 328
• Parties: RIALTO THEATRE, INC., a Wyoming corporation, Appellant (Plaintiff), v. COMMONWEALTH THEATRES, INC., a Missouri corporation, Appellee (Defendant) (Two Cases). COMMONWEALTH THEATRES, INC., a Missouri corporation, Appellant (Defendant), v. RIALTO THEATRE, INC., a Wyoming corporation, Appellee (Plaintiff).
• Court: Wyoming Supreme Court

Page 328

714 P.2d 328

RIALTO THEATRE, INC., a Wyoming corporation, Appellant (Plaintiff), v. COMMONWEALTH THEATRES, INC., a Missouri corporation, Appellee (Defendant) (Two Cases).

COMMONWEALTH THEATRES, INC., a Missouri corporation, Appellant (Defendant), v. RIALTO THEATRE, INC., a Wyoming corporation, Appellee (Plaintiff).

Nos. 84-162, 84-163 and 84-233.

Supreme Court of Wyoming.

Feb. 3, 1986.

James R. McCarty, Casper, for Rialto Theatre, Inc.

Robert Jerry Hand, of Hand, Hand & Hand, P.C., Casper, for Commonwealth Theatres, Inc.

Before THOMAS, C.J., and ROSE, ^* ROONEY, ^** BROWN, and CARDINE, JJ.

ROSE, Justice.

Procedurally the instant three combined appeals are unusual as they are taken from two separate lawsuits filed by Rialto Theatre, Inc. against Commonwealth Theatres, Inc. for asserted violations of a lease agreement between the parties originally executed in 1968. The object of that agreement was the operation of theatres owned by Rialto in Casper, Wyoming, by Commonwealth. Rialto sought injunctive relief and monetary damages for asserted violations of a lease provision which prohibited competition between the parties and which required future cooperation in protecting the market from outside competition by construction of additional theatres when deemed necessary by either party.

In its original complaint filed on May 14, 1982, Rialto sought an injunction preventing the opening of a new theatre by Commonwealth and monetary damages for lost rents as a result of the opening of a second theatre by Commonwealth in 1974. The district court dismissed the cause of action praying for injunctive relief. Trial on the remaining count resulted in a determination by the jury that, although Commonwealth had breached the lease, Rialto failed to prove the amount of its damages with reasonable certainty. Rialto has appealed the dismissal of the injunctive count and additionally argues the jury erred in awarding only nominal damages (Appeal No. 84-162). Commonwealth has also appealed, asserting that the district court should have ruled as a matter of law that the paragraph of the lease relied upon by Rialto was unenforceable (Appeal No. 84-163).

The second lawsuit filed by Rialto sought to enjoin Commonwealth from continued operation of the additional theatres until the lease term expired. This complaint was filed on April 16, 1984, some 12 days after the jury returned its verdict in the original lawsuit but prior to the entry of the court's judgment on May 9, 1984. A motion to dismiss on the grounds of res judicata and collateral estoppel was granted on August 9, 1984. Rialto has appealed (Appeal No. 84-233), and this court has combined the cases for purposes of decision.

We shall affirm the district court's decision in No. 84-162 and No. 84-233, and dismiss the claims for injunctive relief. We shall remand No. 84-163 for entry of an order dismissing the claim for damages for violation of the lease agreement.

By a lease and sublease agreement ¹ executed on August 6, 1968, Rialto Theatre, Inc. rented various theatre properties located in Casper, Wyoming, and nearby communities to Commonwealth Theatres, Inc. for a term of 15 years with an option to renew for an additional five years. Rent on all the properties was set at a minimum fixed amount per year plus percentages of gross revenues from ticket sales, concessions and other sources. As part of that document, the parties agreed that:

"14. Lessor and Lessee respectively warrant to each other that neither they nor their respective officers, directors or stockholders shall, during the term hereof, enter directly or indirectly into the business of owning, operating or managing theatres within twenty-five (25) miles of the city limits of Casper, Wyoming, without the prior written consent of the other. In the event either Lessor or Lessee desires or deems it necessary to build another theatre in Casper, Wyoming, then it is agreed that Lessor and Lessee will enter into an agreement to construct the same and will enter into a lease thereof."

During the next several years relations between the parties were handled primarily by Russell W. Schulte for Rialto and Richard H. Orear on behalf of Commonwealth, the presidents of the respective corporations. As is frequently the case in family-oriented closely held corporations, such as Rialto and Commonwealth, communications between the parties began to deteriorate in 1976, following the death of one of the principals, Russell W. Schulte. Prior to that time, Commonwealth and Rialto had jointly participated in developing and opening the Mile-Hi Drive-In Theatre in Casper. Similarly, the parties actively pursued the possibility of opening a new indoor theatre together during 1971 within the provisions of the lease agreement. Plans for this project were scrapped when the contractor who was to do the work on the new theatre was unable to obtain a building permit.

In 1973, Commonwealth again approached Rialto with a proposal that Rialto participate in the opening of a new indoor theatre in Casper which was to be built in the Beverly Plaza Shopping Center. A number of unsuccessful discussions were held between Orear and Schulte in an attempt to persuade Rialto to participate in the venture. On March 6, 1973, Orear sent a letter to Schulte urging that Rialto participate in the project; however, Schulte declined, as Rialto was involved in the construction of a theatre in Glenwood Springs, Colorado, at the time. The Beverly Twin Cinema opened in Casper in February of 1974, and is one of the theatres whose operation is complained of in this case.

In February of 1977, after Russell Schulte's death, Orear, who was now chairman of the board of Commonwealth, wrote Russell's son, Edward J. Schulte, M.D., who had assumed the presidency of Rialto, that there were rumors that a new theatre would be built in Casper and it was necessary that they work together to keep out the competition. Dr. Schulte wrote back on May 30, 1977, questioning whether a new theatre was needed and, even if built, whether competition would be kept out. Figures regarding the success of the Beverly Twin were requested, and Commonwealth was notified that:

" * * * [T]he Schulte Family is quite interested in protecting their basic theatre interests in Casper. In that regard we want to be included in any decision making concerning future theatre operations in Casper. It is also expected of Commonwealth that they will uphold Paragraph 14 of the lease, the provisions of which were apparently ignored when the Beverly Twins were built."

Orear responded on behalf of Commonwealth on June 7, 1977, outlining the events leading to the opening of the Beverly Twin and requesting to meet together with representatives of Rialto to determine their future plans together. Such a meeting was held in July, 1977, in Denver, Colorado.

In 1978 two significant events occurred: Fred Schulte took over as president of Rialto, and Commonwealth acquired a company called Westco Theatres. One of the assets acquired by Commonwealth in this purchase was an option to operate a theatre in the Eastridge Mall which was to be built in Casper by Price Development Company of Salt Lake City, Utah. The record is conflicting as to whether or not Rialto knew of Commonwealth's interest in moving into the Eastridge Mall. Applying our usual appellate standard of review in favor of the jury's verdict, we will assume that Rialto did not discover Commonwealth's interest in the Eastridge venture until sometime in 1981. Contemporaneously, the parties were investigating the possibility of jointly participating in the opening of a new multi-screen theatre complex on the site of the Mile-Hi Drive In.

Commonwealth exercised the option to renew the 1968 agreement on December 30, 1981. Plans to build a new theatre on the Mile-Hi site were actively discussed by the parties. In addition, Rialto was informed of the proposal to build a new theatre in the Eastridge Mall. In June of 1981, Orear sent a letter to Fred Schulte urging that a decision with respect to building on the Mile-Hi site be reached soon to ensure the building could be enclosed prior to the onset of winter. Again, in August of 1981, Orear wrote Rialto stating that it was vital to start construction on the Mile-Hi. In addition, Schulte was informed that Commonwealth had engaged in further discussions with the developers of the Eastridge Mall and the developers were threatening, in no uncertain terms, to bring a competitor into the Casper area to lease the new theatre.

On November 20, 1981, Orear wrote a letter on behalf of Commonwealth, outlining a plan whereby Commonwealth and Rialto would create a new jointly held corporation which would take over the existing lease, lease the yet-to-be-constructed Westwood Theatre on the Mile-Hi site, and lease or sublease the Eastridge project. An alternative proposal which would have required Rialto to finance construction of the Westwood by its own resources was also discussed. In a follow-up letter on December 7, 1981, Commonwealth requested that a decision be made on the construction of the Westwood Theatre. In the meantime, negotiations on the Eastridge project had stalled, as the developer refused to return Commonwealth's calls and desired a combination lease coupling a project in Idaho Falls, Idaho, to the lease on the Casper theatre.

On April 6, 1982, Orear wrote a letter advising that the Eastridge developer had rescinded its demand for a combination lease but that it appeared unlikely Commonwealth would accede to the remaining terms demanded for the Eastridge project. The possibility of building a multi-screen theatre on the Mile-Hi site was again renewed, but it was noted that this would be a near impossibility unless Commonwealth had a very favorable ground rent from Rialto. Orear suggested that, in order to allow Commonwealth to build a new theatre, it was imperative that the Rialto Theatre be...