Richard Barton Enterprises, Inc. v. Tsern, s. 940295

• Decision Date: 06 August 1996
• Docket Number: 940321,Nos. 940295,s. 940295
• Citation: 928 P.2d 368
• Parties: RICHARD BARTON ENTERPRISES, INC., a California Corporation, dba California Packaging, and Richard Barton, Individually, Plaintiffs, Appellees, and Cross-Appellants, v. John F. TSERN and the Tsern Family Trust, Defendants, Appellants, and Cross-Appellees. John F. TSERN and the Tsern Family Trust, Third-Party Plaintiffs, v. KIMBALL ELEVATOR COMPANY, a California Corporation, Third-Party Defendant.
• Court: Utah Supreme Court

Page 368

928 P.2d 368

RICHARD BARTON ENTERPRISES, INC., a California Corporation, dba California Packaging, and Richard Barton, Individually, Plaintiffs, Appellees, and Cross-Appellants, v. John F. TSERN and the Tsern Family Trust, Defendants,

Appellants, and Cross-Appellees.

John F. TSERN and the Tsern Family Trust, Third-Party Plaintiffs, v. KIMBALL ELEVATOR COMPANY, a California Corporation,

Third-Party Defendant.

Nos. 940295, 940321.

Supreme Court of Utah.

Aug. 6, 1996.

Rehearing Denied Dec. 12, 1996.

Donald J. Winder, Robert D. Tingey, Salt Lake City, and Michael J. Cappelli, Laguna Niguel, Cal., for Bartons.

John T. Anderson, Salt Lake City, for Tserns.

Russell C. Fericks, Salt Lake City, for Kimball Elevator Co.

STEWART, Associate Chief Justice:

Defendants John F. Tsern and the Tsern Family Trust (collectively "Tsern") appeal a judgment awarding plaintiffs Richard Barton and Richard Barton Enterprises (collectively "Barton") a rent abatement under a commercial lease and the cost of repairing an elevator. Barton has cross-appealed the trial court's award of attorney fees and interest. We affirm.

I. FACTS

On November 21, 1991, Barton and Tsern entered into an agreement titled "Earnest Money Receipt and Offer to Lease," and on November 27, 1991, the parties executed a lease pursuant thereto for the first and second floors of a commercial building in downtown Salt Lake City. Barton agreed to pay rent at the rate of $3,000 per month for the one-year lease. The lease required Tsern to deliver possession of the premises to Barton on December 1, 1991. On November 27, Barton paid Tsern $9,000, covering the first and last months' rent and a $3,000 security deposit. Barton also paid an additional $3,000 as earnest money for an option to purchase the entire building.

The terms of the earnest money agreement were expressly incorporated into the lease. The lease provided, "[T]he 'Earnest Money Receipt and Offer to Lease' dated November 21, 1991, shall be attached to this lease as an addendum. All terms and conditions are binding to [sic] both parties." Added to the terms of the printed earnest money form were the typed words, "Other than stated in lines 32 and 33, Tenant shall accept the building in 'As Is' condition." The language on lines 32 and 33 required Tsern to repair the building's leaky roof and the freight elevator to "good working order."

Barton's purpose in leasing the building was to establish an antiques dealership. The business inventory included large architectural pieces that, because of the dropped ceiling of the main floor and other limitations, had to be stored on the second floor. For that reason Barton required a freight elevator to transport the large, heavy pieces to the second floor. Barton's need for the elevator was communicated to Tsern repeatedly, both prior to signing the earnest money agreement, when Barton became aware that the elevator was inoperable, and after the lease was executed and Barton took occupancy of the leased premises.

Barton took possession of the ground floor on December 1, 1991, but could not obtain possession of the second floor until December 20, when a holdover tenant finally vacated the floor. The elevator was wholly inoperable, and Tsern had neither repaired the elevator nor entered into a contract to have it repaired. Moreover, the roof had not been repaired. The elevator remained inoperable until January 9, 1992, when Kimball Elevator Co., pursuant to a time and materials contract with Tsern, made certain repairs to the elevator. On Tsern's instructions, however, Kimball made only those repairs necessary to make the elevator operational in the sense that it would "go up and down." Tsern strictly limited the amount of money he would pay Kimball for repairs to $5,000 and expressly refused to authorize a number of repairs that Kimball stated were necessary to make the elevator operate reliably and safely. The strict limitations placed on Kimball's repairs and the failure to authorize additional needed repairs were not communicated to Barton. In fact, Tsern instructed Kimball not to mention those limitations to Barton.

The elevator operated from January 9, 1992, until January 24, 1992, when a city inspector ordered it shut down. After Kimball made an additional repair required by the city inspector on February 13, the elevator again operated until March 14. On April 10, a state elevator inspector found that the elevator was not in compliance with state law, directed Tsern to correct nine violations, and ordered the elevator shut down until it could pass a state safety inspection. Apparently believing that Barton intended to exercise its option to purchase the building, Tsern refused to spend the $5,552 to make those repairs. During the term of the lease, Barton continually demanded that the elevator be properly repaired. It never was and did not operate at all after March 14, 1992.

On December 10, 1991, Barton and Tsern each sent the other a communication concerning the possibility of a rent abatement. As already noted, at that point Barton had not yet obtained occupancy of the second floor because of a holdover tenant, the leaky roof still had not been repaired, and the elevator was inoperable. Barton suggested a rent abatement because of the difficulties. Independent of that request, Tsern on his own suggested a 50% rent abatement, but Barton never accepted his proposal. The parties never agreed on a rent abatement amount, nor did they specify which of Barton's claims would give rise to an abatement. Nevertheless, the trial court found that the parties had "agreed in principle" to the "concept" of a rent abatement, even though they had agreed neither to the amount of an abatement nor even to which of Barton's claims of noncompliance with the lease should qualify for an abatement.

Barton tendered less than the full rent for the months of January and February, and Tsern cashed the checks but maintained that he was entitled to the full rent of $3,000 for each month. Because the elevator operated during the latter part of January and the early part of February, Barton tendered full rent for February on February 1, minus a minor offset for something unrelated to the elevator. On April 15, 1992, Barton filed a complaint for a declaratory judgment to establish Tsern's legal duty to repair the elevator. Tsern counterclaimed with a three-day notice to pay the rent in full or quit the premises. The counterclaim was dismissed for reasons not now pertinent. Mr. Barton later gave notice that he was exercising his option to purchase, and to cure any possible rental defaults, he deposited $19,000 with the court on October 29, 1992. On November 30, 1992, the court ruled that Barton could exercise the option to purchase prior to the conclusion of the bench trial on his declaratory judgment claim.

In its final judgment, the court found that the elevator had not been repaired to "good working order" as required by the lease, and entered judgment against Tsern for the cost of repairing the elevator to that standard. Citing Wade v. Jobe, 818 P.2d 1006 (Utah 1991), the court also ruled that although Barton and Tsern had never agreed on the amount of a rent abatement, Barton was entitled to have the rent abated to $2,000 a month and, in addition, that Barton's damages plus accrued interest should be deducted from the purchase price of the building. Finally, the court entered judgment against Tsern for attorney fees in the amount of $100,000.

On this appeal, Tsern asserts (1) that Barton's covenant to pay rent was independent of all Tsern's covenants and that the trial court erred in awarding Barton a rent abatement, (2) that Barton's exercise of the option to purchase extinguished Tsern's obligation to repair the elevator, and (3) that the trial court's ruling that Kimball had not breached its contract with Tsern to repair the elevator was error because that ruling was inconsistent with the ruling that Tsern had failed to have the elevator repaired to "good operating order." On cross-appeal, Barton contests the trial court's calculation of attorney fees and its award of interest to Tsern on the option price.

II. RENT ABATEMENT UNDER A COMMERCIAL LEASE

Tsern contends that the trial court erred in ruling that it could fix an amount for the abatement of rent based on that court's finding that the parties had agreed to the "concept" of rent abatement during the time the elevator was inoperable but not to the amount. In the alternative, Tsern contests the trial court's ruling that Barton's covenant to pay rent was dependent on Tsern's compliance with the covenant to repair the elevator. Barton contends (1) that there was an oral agreement with Tsern to abate rent, and alternatively (2) that Barton was entitled to abatement on the ground that Tsern violated an implied covenant of suitability of the building for the intended purpose and, in any event, that the covenant to pay rent was dependent on the covenant to repair the elevator.

It is fundamental that a meeting of the minds on the integral features of an agreement is essential to the formation of a contract. See Pingree v. Continental Group of Utah, Inc., 558 P.2d 1317, 1321 (Utah 1976); Valcarce v. Bitters, 12 Utah 2d 61, 362 P.2d 427, 428 (1961). An agreement cannot be enforced if its terms are indefinite or demonstrate that there was no intent to contract. Valcarce, 362 P.2d at 428; 1 Joseph M. Perillo et al., Corbin on Contracts § 4.3, at 569 (rev. ed. 1993).

The trial court found that the parties "agreed to the concept of a rent credit" (emphasis added) but did not agree on an amount. Communications between the parties concerning a possible rent abatement began on December 10, 1991. At that time, Tsern had not repaired the elevator or even contracted to have it repaired, and a holdover tenant still had possession of the second floor. Barton therefore could have repudiated the lease. Barton proposed a rent...