Ulan v. Vend-A-Coin, Inc.

• Decision Date: 03 November 1976
• Docket Number: INC,VEND-A-COI,CA-CIV,No. 2,2
• Citation: 558 P.2d 741,27 Ariz.App. 713
• Parties: , 5 A.L.R.4th 1 Leon ULAN and Sylvia Ulan, husband and wife, Appellants, v., an Arizona Corporation, Appellee. 2119.
• Court: Arizona Court of Appeals

Page 741

558 P.2d 741

27 Ariz.App. 713, 5 A.L.R.4th 1

Leon ULAN and Sylvia Ulan, husband and wife, Appellants, v. VEND-A-COIN, INC., an Arizona Corporation, Appellee.

No. 2 CA-CIV 2119.

Court of Appeals of Arizona, Division 2.

Nov. 3, 1976.

Rehearing Denied Nov. 30, 1976.

Petition for Review Denied Jan. 4, 1977.

Law Offices of William L. Berlat, P.C. by William L. Berlat, Tucson, for appellants

Feldman, Wolin & Lahr, P.C. by Marvin Wolin, Tucson, for appellee.

OPINION

KRUCKER, Judge.

Vend-A-Coin, Inc. is an Arizona corporation which operates laundry machines in various locations throughout Tucson, Arizona. The machines are operated under a writing which is styled 'Location Agreement.' On October 30, 1969, Vend-A-Coin, appellee herein, obtained a 'location Agreement' from A. P. Brown and Company, the property manager of Spencer Joy Apartments.

The agreement in question contains eight clauses and provides, inter alia, that the operator will install coin-operated laundry equipment and will pay to the owner of the premises a sum equal to 35 percent of each prior month's gross receipts. The agreement was to last for 15 years and during that period the owner agreed not to maintain or cause to be installed any other laundry equipment on the premises.

The agreement further provided that all 'rough-in' installations necessary to the operation of the laundry equipment were to be provided at the owner's expense. Clause No. 8 of the writing contained the provision that the agreement '. . . shall be binding upon the heirs, successors or assigns of the respective parties hereto.' The agreement was signed by the property manager of A. P. Brown and Company and witnessed by the resident manager. It was recorded in April, 1972.

Thereafter, Vend-A-Coin installed two washers and one dryer, despite the terms of the written agreement, and incurred 'rough-in' expenses of approximately $700 to $800.00. The expenses arose from the installation of a hot water heater and certain electrical and plumbing connections. ¹ Apparently, for the next 3 1/2 to 4 years the appellee operated the machines without problem. The record reflects that 'sometime in 1973' Denton Realty Company bought the apartment complex.

Appellant, Leon Ulan, was also in the laundry machine location business and was in close competition with Vend-A-Coin. An agent, working for Ulan, approached Denton Realty in the hope of soliciting new business locations. As a result of this solicitation, Denton informed appellants that they could have the laundry operation at three apartments which they owned, including Spencer Joy. With Denton's authorization, Ulan replaced appellee's machines with his own, severely damaging the former during the course of the replacement.

Appellee filed suit against Denton Realty and appellants alleging breach of contract and interference with an existing contract. After a trial by jury, a verdict was returned against appellants in the amount of $500 actual damages and $7,000 punitive damages. This appeal followed.

Appellants have presented four issues for our review. We need not, however, consider them all in order to properly dispose of this case.

The initial question to be resolved is whether the writing before us is a valid license agreement or is rather in the nature of a lease. Although there are some cases to the contrary, the majority of reported decisions have held that contracts of the type under consideration are licenses. American Coin-Meter of Colorado Sp., Inc, v. Poole, 31 Colo.App. 316, 503 P.2d 626 (1972); Halpern v. Silver, 187 Misc. 1023, 65 N.Y.S.2d 336 (N.Y.City Ct. 1946); Muller v. Concourse Investors, Inc., 201 Misc. 340, 111 N.Y.S.2d 678 (1952). We are of the opinion that the majority view is correct. A license is merely a permit or privilege to do what otherwise would be unlawful. Radke v. Union Pacific Railroad Company, 138 Colo. 189, 334 P.2d 1077 (1959). A lease, however, gives the right of possession of the properly leased and exclusive use or occupation of it for all purposes not prohibited by its terms. American Coin-Meter of Colorado Sp., Inc. v. Poole, supra.

In the case at bar, Vend-A-Coin received no right of possession to the premises by virtue of the agreement. Rather, it had the mere right to enter the premises for certain limited purposes set forth in the agreement. At no time did appellee acquire an interest in the laundry space. On the contrary, its interest was confined to the machines and their ordinary maintenance.

Working from the premise that the location agreement is indeed a license, the next question to be resolved is whether the license agreement was irrevocable and thus binding on Denton Realty Company. It is appellee's position that the terms of the contract bound the original licensor while Denton, as subsequent purchaser, was bound by virtue of the irrevocability of the license. In support of this position, appellee asserts that the license was either coupled with an interest or was executed. Again, we cannot agree. We first note that our research has failed to uncover a single Arizona decision which has recognized the license coupled with an interest doctrine. In any event, this exception to the general rule of the revocability of a license is applicable only where the licensee has an interest in the property itself (e.g., an interest in crops, timber or minerals on the property). Anchor Stone and Materials Company v. Carlin, 436 P.2d 650 (Okl.1967). It has been said that in such a case the authority conferred is not merely a permission but amounts to a grant or easement.

The whole thrust of appellee's opening argument to this court as to the nature of the location agreement was that it was merely the granting of a privilege which did not amount to an interest in the real property. Now, appellee apparently desires to enjoy the best of both worlds by taking the exact opposite position. It is our opinion that no sufficient interest in the land exists for appellee to invoke the exception.

In the alternative, appellee states that the location agreement was an executed license in that a sum of money had been expended in installing the machines. We do not believe that the executed license doctrine is apposite. First, the exception generally applies to parol rather than written licenses. See, Murduck v. City of Blackwell, 198 Okl. 171, 176 P.2d 1002 (1946); 25 Am.Jur.2d Easements and Licenses § 130 (1966). In the case at bench, we are dealing with an express written agreement which calls for the owner of the premises to bear installation costs. Secondly, the doctrine contemplates that any expense incurred must be for substantial improvements of a permanent rather than temporary nature. See, Anchor Stone and Materials Company v. Carlin, supra.

The principal Arizona decision recognizing the executed license exception is in harmony with our interpretation of the doctrine. In Keystone Copper Mining Co. v. Miller, 63 Ariz. 544, 164 P.2d 603 (1945), our Supreme Court, after citing the general language from 33 Am.Jur. 400 Sec. 92; 408 Sec. 103, Licenses, stated:

'An executed license, As where the licensee expends money in constructing buildings and uses the ground with the assent, knowledge and acquiescence of the owner, creates or results in an equitable right capable of being assigned and which may not be disregarded or revoked by the owner of the premises.' (Emphasis added)

In our opinion the executed license exception should not be expanded to encompass the fact situation at bench. To hold otherwise could lead to unfortunate and unjust results. A supplier, simply by making a relatively small expenditure for a permanent improvement (e.g., a pipe), could claim the existence of an executed license. Every subsequent owner of the building or premises, within the term of the agreement, would be bound to deal with the original supplier. We do not believe that the Keystone court desired the executed license exception to encompass such situations.

The general rule is that a license, not falling within a specific exception, is revoked Ipso facto by the licensor's conveyance of the land, or by his doing any act inconsistent with the exercise of the license. American Coin-Meter of Colorado Sp., Inc. v. Poole, supra; Apollo Stereo Music Company, Inc. v. Kling, 528 P.2d 976 (Colo.App.1974); 25 Am.Jur.2d Easements and Licenses Sec. 131 (1966). However, even assuming arguendo, that the license was revoked by the transfer of the property to Denton, it would still appear that a business relationship existed between Denton and Vend-A-Coin after the sale. For at least several months the machines were operated as usual and Denton received payments under the terms and arrangements of the original location agreement. Although the retention of such commissions has been held not to constitute a waiver of the right to terminate, American Coin-Meter of Colorado Sp., Inc. v. Poole, supra, it is evidence of the fact that certain expectancies existed between the parties. The sole remaining question thus becomes whether the conduct of Ulan amounted to an interference with this existing...