Russell v. Sealed Power Corp.

• Decision Date: 03 May 1977
• Citation: 278 Or. 243,563 P.2d 712
• Parties: Sydney H. RUSSELL et al., Appellants, Cross Respondents. v. SEALED POWER CORPORATION, a Delaware Corporation, Respondent, Cross Appellant.
• Court: Oregon Supreme Court

Page 712

563 P.2d 712

278 Or. 243

Sydney H. RUSSELL et al., Appellants, Cross Respondents. v. SEALED POWER CORPORATION, a Delaware Corporation,

Respondent, Cross Appellant.

Supreme Court of Oregon, Department 1.

Argued and Submitted March 9, 1977.

Decided May 3, 1977.

David W. Dardano, Portland, argued the cause for appellants, cross respondents. With him on the briefs were Dardano & Mowry, Portland.

Ridgway K. Foley, Jr., Portland, argued the cause for respondent, cross appellant. With him on the brief were Souther, Spaulding, Kinsey, Williamson & Schwabe and John E. Hart, Portland.

Before DENECKE, C.J., and HOLMAN, HOWELL and DAVIS, JJ.

DAVIS, Justice Pro Tem.

On January 27, 1966, plaintiffs as lessors and defendant as lessee entered into a lease in writing of commercial property located in Portland, Oregon, for a term of 15 years commencing April 1, 1966. The lease provided that defendant would pay $740 a month and there was typed in after the provision for rent the following language:

'Lessee agrees to pay any taxes exceeding $1480.00 annually.'

This was a form agreement prepared by the plaintiffs, neither party represented by legal counsel. Plaintiffs notified defendant on December 17, 1975, that by its failure to pay the 1975--76 taxes in excess of $1,480, the lease was terminated. Upon refusal of defendant to vacate the property, plaintiffs bring this action in forcible entry and detainer.

At the commencement of the trial defendant entered an oral general denial, and during the hearing and with the consent of the parties and the court, defendant entered orally an equitable defense. The transcript fails to designate the nature of the defense.

The facts were submitted to the trial court by stipulation, which is summarized as follows: Each year while the lease was in effect and until 1975, plaintiffs, residents of San Francisco, California, received in October a tax statement from Multnomah County, Oregon, on the leased premises. Plaintiffs immediately thereafter sent a copy of this statement to R. J. Bull, a representative of the defendant, at LaGrange, Indiana, with request for the payment of the difference between the net tax assessed after full discount and $1,480. Mr. Bull forwarded the tax statement to defendant's Michigan office and the excess tax was paid by check directly to plaintiffs. Plaintiffs paid Multnomah County for the taxes assessed. Defendant paid the excess taxes within two weeks of plaintiffs' demand prior to November 15 of each year. On October 16, 1975, plaintiffs, following the identical procedure, sent a copy of the 1975--76 tax statement to the defendant with the request for payment. It was not paid, and again on November 10, 1975, plaintiffs requested payment, which defendant failed to do. On December 17, 1975, plaintiffs terminated the lease agreement by registered mail to the defendant at its Indiana office and to its Michigan office and hand-delivered a notice of termination to the defendant at its Portland office located at the leased premises. On December 19, 1975, defendant mailed to the plaintiffs its check for $911, which said sum was the difference between the net total tax after full discount and $1,480. Plaintiffs rejected the tender and have accepted no rent payments since November, 1975.

The trial judge concluded that the tax owed by defendant was to be included as additional rent, and although defendant was 'technically' in default, the trial judge denied plaintiffs recovery of the leased premises on the basis of 'inadvertent mistake' by defendant's employees. It had been stipulated that defendant's failure to pay before November 15, 1975, was due to an inadvertent 'mixup.' Plaintiffs appeal and defendant cross-appeals on the ruling of the trial judge that the tax was considered additional rent and that it was due on November 15, 1975.

Plaintiffs contend that the court could not grant equitable relief from a statutory forfeiture, ¹ citing Baker v. Lehrer, 210 Or. 635, 312 P.2d 1072 (1957); Caine v. Powell, 185 Or. 322, 202 P.2d 931 (1949); and Rainery v. Quigley, 180 Or. 554, 178 P.2d 148, 170 A.L.R. 1149 (1947). ORS 16.460(2), however, provides that equitable defenses may be pleaded in proceedings such as this, and equitable relief granted if proved. State Hwy. Comm. v. Demarest, 263 Or. 590, 503 P.2d 682 (1972); Fry v. D. H. Overmyer Co., Inc., 269 Or. 281, 525 P.2d 140 (1974).

We have not considered the equitable matter raised for we are of the opinion that the trial court erred in holding that the excess tax owed by the defendant was to be treates as additional rent and that it was due as of November 15, 1975.

Plaintiffs argue that the conduct of the parties over the years, including the prompt payment of excess taxes by the defendant, indicates that both plaintiffs and defendant treated these taxes as an additional...