Gershenhorn v. Walter R. Stutz Enterprises
Gershenhorn v. Walter R. Stutz Enterprises
Opinion of the Court
In this action, by a landlord for a declaration of the rights of the parties under a lease and option, for a cancellation of the lease, restitution of the premises and damages, the main questions presented on this appeal are as follows: (1) Is there substantial evidence to support the trial court’s findings that the building, which the lessors agreed to construct, was substantially completed and ready for occupancy in accordance with the agreement of the parties; that the lessees entered into occupancy thereof and that the lessees were in default in the performance of numerous covenants of the lease? (2) Was “substantial compliance” by the lessors sufficient to entitle them to relief or were certain covenants on their part to be performed such conditions precedent as to require an exact and complete performance? (3)
Appellant Caplow, by assignment, replaced one O’Con-nor as one of the original lessees. On February 12, 1954, the lessors leased to the lessees certain real property in Clark County, Nevada, described by metes and bounds, for which the lessees agreed to pay $5,000 a month rent for five years “beginning when the premises and building being constructed by lessors for lessees is completed, ready and approved for occupancy.” The lessors represented that the zoning and other classification of the premises permitted the “erection, construction and operation of a building and appurtenances which shall be used for legal gambling and other incidental purposes in accordance with the laws of the State of Nevada.” The size of the building was agreed upon and its use described as for cocktail lounge, coffee shop, gambling
Paragraph 28 of the lease reads in part as follows: “Lessees * * * are hereby given the option for three years from completion of the building to be erected * * * to purchase the entire premises * * * at the price and value of $417,000 * * * plus a sum equivalent to the cost of the improvements to be erected * * * ascertained by the production of the records of the lessors * * *. Such option may be exercised by the lessees as aforesaid, by written notice to the
On May 19, 1954, an amendment to the lease was executed in which the size of the building to be constructed was increased, the date of completion extended to July 15, 1954, and the cost fixed at not more than $123,200, plus excess costs of construction not to exceed $12 per square foot. To the $5,000 monthly rental was added an additional sum of 20 percent of the net profits of the business conducted on the premises, subject to certain reductions and conditions. This provision apparently never came into effect. It was further provided that if the business to be conducted should not commence within 6 months from completion of the building, the lease might be terminated at the option of the lessors, in which event, however, they were to reimburse the lessees for the latter’s costs of furniture, fixtures, equipment, supplies etc. The amendment provided further that if the lease were assigned to a limited partnership in which the lessors should hold a 20 percent interest, a three-year option was given to such limited partnership to purchase the premises for $750,000. This provision never became effective. The lessees agreed to lend the lessors $60,000 to assist in the construction of the premises, to be evidenced by noninterest bearing notes payable on or before five years. Of this sum $47,500 was advanced and the notes were given.
A second written amendment was executed June 12, 1954, which permitted the lessees to erect at their own costs a theater and restaurant building to be attached to the casino building. This would involve no further rentals and would add no additional amount to the option price.
Date for completion of construction and delivery of possession was extended to September 10, 1954. On or about that date a notice of completion of construction was filed and the lessors served the lessees with a written notice thereof, and with notice of the additional construction costs subject to the limitations of the contract,
The original complaint in the action filed December 4, 1954, alleged accrual of rentals from September 10, 1954, to date, and two supplemental complaints alleged the further accrual of rentals, default in payment and default in the obligation to commence business within six months, in addition to default in payment of construction costs, discharge of liens, etc.
The lessees and defendants, Caplow and Gershenhorn, appellants herein, answered separately, denied the material allegations of the complaint, alleged default of the lessors in not completing the building, alleged conspiracy and fraud to deprive the lessees of the building and counterclaimed for damages in the sum of $547,500, plus $200,000 additional damages for failing to carry out an oral agreement for the acquisition and assignment of a lease on certain neighboring premises. Further pleadings put all of these matters at issue.
The case was tried to the court without a jury and after submission on briefs, it appears that the court filed a written decision, into which the learned trial judge incorporated findings of fact and conclusions of law drawn by him. In these findings the court found that the structure was substantially completed and ready for occupancy as of September 10, 1954, and that any delay was the result of numerous changes of plans by the lessees; that notice of completion was given and that the lessees entered into possession September 10, 1954, and that no part of the $5,000 monthly rentals has been paid; that the lessees failed to pay the excess costs; that they failed to advance $12,500 of their agreed $60,000 loan; that they failed to commence business within six months after completion or at all; that they failed to keep the premises clear of mechanics’ and materialmen’s liens; that the lessors were compelled, to their damage, to defend numerous lien foreclosure actions; that the lessors had received from the lessees $47,500 of the agreed $60,000 loan and had signed notes for the
As conclusions of law the court found the lessors, respondents herein, entitled to judgment for $100,000 past-due rentals, $75,000 excess costs of the structure under the agreement, $50,000 damages, subject to credit of $47,500 for advances on the notes, and entitled to the surrender and cancellation of the $47,500 notes; plus the plaintiffs’ costs including an attorney fee in the sum of $10,000.
These conclusions of law were written into a formal judgment except that the item of $50,000 damages, less credit of the sums advanced on the notes, was written as a judgment for $2500 damages, plus the surrender and cancellation of the notes. The judgment also ordered cancellation of all of the agreements and that a writ of restitution issue.
(1) The main assignment of error by appellants is that the evidence does not support the court’s findings of fact. They repeatedly call attention to the frank statements of respondents that a number of items of construction required completion. The record, however, is replete with the testimony of the respondents and their witnesses amply sustaining the trial court’s view that such items (except as to certain trivial matters) were entirely the responsibility of appellants. It will be recalled that the second amendment to the lease permitted the appellant lessees, at their own cost, to build a theater cafe. This required substantial revision of the casino building itself. The kitchen was increased to about
(2) Pointing to a number of unfinished details and pointing particularly to the alleged failure of the lessors
Respondents point out that even assuming a failure of completion of the building, such failure was waived because the lessees went into possession and thereby became liable for the rent. Anno. 28 A.L.R.2d 458. They point out that the keys were delivered to appellants, who thereupon began installation of fixtures, bars, carpets, booths, stage curtain, stools, slot machines and gambling equipment; that they opened their offices on the second floor, installed a telephone, employed an operator, publicity men etc., and carried on all operations available to them prior to opening. However, in view of our holding that there was ample support of the court’s findings of substantial completion, it becomes unnecessary for us to pass on the question of waiver.
(3) Appellants assert that they exercised their option to purchase; that it was an independent, separate and severable contract not dependent upon the lessees’ performance of the covenants of the lease; that upon such exercise the rentals ceased, as the contract then became one of seller and buyer and no longer one of lessor and lessee. Under some circumstances this might be so. See Murfee v. Porter, 96 Cal.App.2d 9, 214 P.2d 543. Here the lease and option to purchase both rested upon a common and indivisible consideration. This consideration was the performance by the lessees of the covenants of their lease, foremost of which was the payment of rent. As the lessees were in default in payment of rent and as the lessors gave notice of cancellation by reason thereof and as such cancellation was in accordance with the terms thereof, the lease was thereby terminated, and,
(4) For a further equally impelling reason the purported exercise of the option to purchase cannot prevail. It will be recalled that the action was commenced December 4, 1954, alleging completion of the building September 10, 1954. The defendants answered on March 15 and March 17, respectively, putting in issue all of the matters hereinabove discussed with reference to the completion of the building. On March 21,1955, after such issues had been framed, and six months after plaintiffs claimed completion and delivery of the premises, Caplow, one of the lessees, handed to the lessors a letter comprising some 1300 or 1400 words stating: “This is to advise that as lessee under the lease dated February 12, 1954,1 have elected to exercise the option to purchase the premises and property containing all buildings and appurtenances described as: [description] in accordance with paragraph 28 of said lease at the price of $417,000 plus a sum equivalent to the cost of the improvements erected by lessors upon said premises; that is, the casino building and appurtenances, and in connection with the exercise of said option, I call your attention to the following matters.” The letter then listed under separate captions carpentry work, electrical work, plumbing, painting, insulation, staining of roof, landscaping etc. It then refers to sundry paragraphs of the lease requiring the improvements to be made in accordance with applicable city, county and state laws, ordinances, codes, regulations etc., and alleges the failure of the lessor to procure certificates of occupancy from the building commission, the fire department, the health department, etc. Demand was made for the completion of said building in all of the respects mentioned. The letter analyzed and defined the provisions of the lease, demanded a preliminary title report, outlined the matters to be contained therein, and called attention to the covenant of the lessors not to
Thus the so-called election to purchase put in issue the very matters already in issue under the pleadings in the pending suit in the district court. It is hardly conceivable that these issues could be tried out in any other tribunal while such suit was pending. The letter was handed to the lessors in the midst of one of the proceedings of that very action, namely, during the taking of a deposition. It was by its very terms contingent upon the determination of the issues already raised in the pending suit. The statement that the lessees “will be prepared to deposit the option price in an escrow company” cannot be considered otherwise than as being tied in to the contentions of the lessee Caplow that no rentals were due from September 10, 1954, to March 21, 1955; that no rentals would accrue after March 21, 1955; that the option price would be reduced to the extent of all liens filed against the property and to the extent of large sums of money as damages resulting from alleged breaches on the part of the lessors and to the extent of an estimated $50,000 required to complete the building. These were all contested matters, and the notice by lessee Caplow to the effect that “I have elected to exercise the option” and that “we will be prepared to deposit the option price” under the conditions mentioned and particularly in view of the finding of the court that lessors had substantially completed the building and had delivered the premises on September 10, 1954, cannot in law be considered an exercise of the option.
(6) Appellants contend that there was a nonjoinder of essential parties defendant. While a motion to join additional parties defendant was made in the trial court, this motion was withdrawn when the plaintiffs called the court’s attention to their attempts to obtain through depositions of the named defendants the names of other parties who might be interested with them in the enterprise described, and the consistent refusal of such named defendants to divulge the names of any persons who might be so interested. The separate counsel for defendant Gershenhorn and for defendant Caplow conceded in open court that plaintiffs’ point was well taken, and the court denied the motion. Appellants do not deny that
(7) Appellants next assert that there was a fatal variance between the pleadings and the proof with reference to that part of the judgment ordering a cancellation of the $47,500 five-year noninterest bearing notes given the lessees by the lessors in evidence of moneys advanced by the lessees to assist in the construction by the lessors. Appellants say that these notes were not described in the complaint. However, the lease attached to the complaint as an exhibit and expressly made a part thereof required the notes to be given and the complaint alleged that of the required $60,000 loan required by the specific provision of the lease, $47,500 had been advanced but that there had been a default in the advance of $12,500. Defendants in their pleadings alleged their advance of $47,500 as a loan in accordance with the terms of the lease, defendants Caplow and Gershenhorn both testified to the making of the loan, and the matter of the notes was the subject of considerable examination, in which the court itself joined. Accordingly, (a) the question of the notes was sufficiently raised by the pleadings; and (b) the issue of the right to a cancellation of the notes was tried before the court by consent of the parties and must in any event be treated in all respects as if it had been raised in the pleadings. Rule 15 (b) N.R.C.P. Nor does the lack of an amendment in the premises affect the validity of the judgment. See Moore’s Federal Practice, sec. 15.13, commenting on this
(8) We have noted that, in addition to adjudging a cancellation of the contract and awarding restitution of the premises, the court rendered judgment against the lessees for $100,000 past-due rentals, $75,000 excess costs of the structure under the terms of the contract, $10,000 attorney fees and $50,000 additional damage. The $100,-000 rental is based upon the agreed $5,000 per month for twenty months. The item of $75,000 for excess construction costs was arrived at by the court from oral and documentary evidence supporting these costs in a considerably larger sum but limited by the provisions of the lease to $12 per square foot, and finds ample substantiation in the record. The $10,000 attorney fee was allowed under the provisions of the lease.
The judgment for $50,000 damages, however, apparently is based upon finding of fact No. 7, which reads in full as follows: “7. That defendants failed to keep the premises clear of mechanics’ or materialmen’s liens, neither did they contest the same, nor did they satisfy process levied against lessees’ interest within ninety days or at all. That plaintiffs have been damaged in that they had to defend at their own cost and expense numerous actions against liens and process in which defendants here were named therein as defendants.” (Emphasis supplied.) Such finding patently does not of itself support a judgment for $50,000. If it does, it might as well be said that it supports a judgment on such item for several times that amount. The record does indeed contain much evidence concerning the filing of liens against the premises by reason of labor and materials ordered by the lessees and for whose costs they were responsible. The record further discloses the commencement of suits
Other questions “lurk in the record” which have caused the court some concern but which have not been properly presented for determination. Indeed, by reason of our desire to do justice to the parties and because of the very substantial amounts involved, we have gone to considerable length in attempting to define the issues presented despite obstacles and difficulties growing out of the manner of their presentation. In the first place, appellants’ opening brief assigned as error variance between the pleadings and the proof, misjoinder of parties plaintiff, nonjoinder of parties defendant, failure of
In concluding we find it necessary to define the manner in which our decision affects the judgment. This was
in its final effect as follows:
For rental............................................... $100,000
For excess costs of construction.......... 75,000
For damages for costs of defending lien suits......................................... 50,000
Attorney fee allowed............................. 10,000
Gross judgment..................................... $235,000
Offset allowed by reason of moneys advanced by defendants................ 47,500
Net judgment........................................ $187,500
Modification by this court by deducting item of.......................... 50,000
Net judgment pursuant to ofir modification............................ $137,500
In order to make the offset effective the trial court
070rehearing
On Petition for Rehear-ing
After modification and affirmance of judgment appealed from, a petition for rehearing was filed. The Supreme Court, Per Curiam, held that petition for rehearing should be confined to statement of points upon which right to present argument and authority is sought and that argument upon merits is out of place in such petition; and held that since the thirty-four page petition filed herein was, in substance, a reargument of appeal, rehearing must be denied.
With increasing frequency counsel seem to be confusing the function of a petition for rehearing with the rehearing itself. In this case a “petition” of 34 pages has been filed by the appellants which, upon patient reading, is discovered to be in substance a reargument of the appeal. For this reason, rehearing is denied.
We deem this an appropriate occasion to point out to the members of the bar that argument upon the merits is out of place in a petition for rehearing. The. petition asks leave to argue and should, therefore, confine itself to a statement of the points upon which the right to present argument and authority is sought. See “Rehearing In American Appellate Courts”, 44 Cal. Law Review 627. At page 658 of the cited article it is stated (referring to the petition), “It should be brief and it should not be argumentative; it should point to the conflict created [by] or the ‘controlling’ matter overlooked in the original decision. It should not be expected to also serve the role of persuading the court how the conflict or error should be resolved. That is the object of resubmission. The object of the petition is only to show that the petitioner is entitled to a rehearing, not that he is entitled to a different decision on the merits.”
Reference
- Full Case Name
- SOL GERSHENHORN and D. H. CAPLOW, Appellants, v. WALTER R. STUTZ ENTERPRISES, a Limited Partnership, WALTER R. STUTZ and LOUIS STUTZ, Respondents
- Cited By
- 7 cases
- Status
- Published