Fairchild Realty Company v. Spiegel

Annotate this Case

98 S.E.2d 871 (1957)

246 N.C. 458

FAIRCHILD REALTY COMPANY v. SPIEGEL, Inc., and Morrison-Neese, Inc.

No. 601.

Supreme Court of North Carolina.

June 28, 1957.

*876 Brooks, McLendon, Brim & Holderness, Greensboro, for defendants-appellants, by Hubert Humphrey, Jr., Greensboro.

Jordan & Wright, Greensboro, for plaintiff-appellee.

RODMAN, Justice.

Findings of fact, when supported by any evidence, are conclusive on appeal. Dayton Rubber Co. v. Shaw, 244 N.C. 170, 92 S.E.2d 799; Reid v. Johnston, 241 N.C. 201, 85 S.E.2d 114; Queen City Coach Co. v. Carolina Coach Co., 237 N.C. 697, 76 S.E.2d 47. Conclusions of law, even if stated as factual conclusions, are reviewable. Moore v. Deal, 239 N.C. 224, 79 S.E.2d 507; Allman v. Register, 233 N.C. 531, 64 S.E.2d 861; Radio Station WMFR, Inc., v. Eitel-McCullough, Inc., 232 N.C. 287, 59 S.E.2d 779.

The parties are not in agreement with respect to what transpired at the July 1955 conference between representatives of plaintiff and representatives of defendants, called for the purpose of discussing a sale of Spiegel's furniture business and an assignment of the lease of plaintiff's building. Defendants assert that plaintiff arbitrarily announced it would not assent to any assignment unless it could get a new lease based on 4 or 4½% of sales, with a guaranteed minimum of $25,000. Plaintiff denies this, and its witnesses testified that there was discussion of a new lease with changes to be made in the building including air conditioning; and only after that idea was abandoned was the question of an assignment *877 of the lease discussed. At that time defendants were notified plaintiff would require complete information with respect to the merchandising ability and financial standing of any proposed assignee before it would give its consent.

There is evidence supporting the court's finding of fact that plaintiff was not furnished information sufficient to require its assent to the assignment and that its consent was not unreasonably withheld. The rights of the parties must be determined in the light of that established fact.

Article 23 of the lease is a restriction on lessee's right of alienation. Rogers v. Hall, 227 N.C. 363, 42 S.E.2d 347. It does not purport to be a covenant on the part of lessee. Whether a violation of that restrictive provision comes within the provision of Article 24 which permits lessor to terminate the lease upon default by lessee of its covenants need not now be determined. Plaintiff so asserted and has acted upon the theory that it did have that right.

Thus we are brought to the crucial question of the case: Has plaintiff, by the acceptance of rents for a period of more than a year and with knowledge that the lease had been assigned, waived any right which it had to declare a forfeiture on account of the assignment, or may it now exercise that right?

The Court, in Danville Lumber & Manufacturing Co. v. Gallivan Building Co., 177 N.C. 103, 97 S.E. 718, 720, said: "No one can be said to have waived that which he does not know, or where he has acted under a misapprehension of facts. Waiver or acquiescence, like election, presupposes that the person to be bound is fully cognizant of his rights, and, that being so, he neglects to enforce them, or chooses one benefit instead of another, either, but not both, of which he might claim. The knowledge may be actual or constructive; one cannot be willfully ignorant and relieve himself from a waiver, because he did not know. The question of waiver is mainly one of intention, which lies at the foundation of the doctrine. Waiver must be manifested in some unequivocal manner, and to operate as such it must in all cases be designed, or one party must have so acted as to induce the other to believe that he intended to waive, when he will be forbidden to assert the contrary."

"Election is simply what its name imports; a choice, shown by an overt act, between two inconsistent rights, either of which may be asserted at the will of the chooser alone." Mr. Justice Holmes in Bierce v. Hutchins, 205 U.S. 340, 27 S. Ct. 524, 525, 51 L. Ed. 828.

Stacy, J. (later C. J.), in applying these principles to the case of a landlord who with knowledge of a breach accepted rents, said: "It is the generally accepted rule that if the landlord receive rent from his tenant, after full notice or knowledge of a breach of a covenant or condition in his lease, for which a forfeiture might have been declared, such constitutes a waiver of the forfeiture which may not afterwards be asserted for that particular breach, or any other breach which occurred prior to the acceptance of the rent." Winder v. Martin, 183 N.C. 410, 111 S.E. 708, 709.

The rule as stated has been consistently applied in similar factual situations. Richburg v. Bartley, 44 N.C. 418; Fredeking v. Grimmett, W.Va., 86 S.E.2d 554; Whitehouse Restaurant v. Hoffman, 320 Mass. 183, 68 N.E.2d 686; Hunt v. Shell Oil Co., 10 Cir., 116 F.2d 598.

The case of Woollard v. Schaffer Stores Co., decided by the New York Court of Appeals, reported in 272 N.Y. 304, 5 N.E.2d 829 and 109 A.L.R. 1262, with lengthy annotations, bears close resemblance to the facts of this case. There, as here, a declaratory judgment was sought to determine the rights of the parties. There the lease contained a covenant that lessee would not sublet nor make structural changes in the building. These covenants were violated. Here the lease contains a *878 restriction on the right to assign. This provision has been violated. There the landlord, after learning of the breach of the covenant, accepted rents with this reservation: "any rentals you may pay hereafter will be received by me only with the understanding that the same are received without prejudice to the action which will follow your failure to comply with my notice of September 19." The notice referred to was that the lease had terminated by the breach. Here no reservation of rights was attempted by the landlord when it accepted the rent checks from the lessee. There and here rent checks were issued and accepted after suit was begun by the landlord to enforce his asserted rights. The court held that the acceptance of rent, notwithstanding the notification and reservation waived landlord's right to terminate. Here there has been no reservation attempted in accepting the rents. True the landlord refused to accept a check of the assignee, and the payments were made by lessee. That fact makes no difference. See Landlord and Tenant, 32 Am.Jur. sec. 883; 51 C.J.S. Landlord and Tenant § 117(2)(a).

Every fact necessary to establish waiver in accordance with the definition given in Danville Lumber & Manufacturing Co. v. Gallivan Building Co., supra, is present here. Plaintiff, when it wrote its letter of 16 August had knowledge of the assignment if not the details of the assignment. It knew the provisions of the lease and that the assignment did not have lessor's approval. It notified defendant Spiegel: "We shall terminate the lease, take steps to repossess the premises and preserve for ourselves all other legal rights and remedies provided in the lease." In several letters written thereafter it reiterated its intent to terminate the lease. It informed Spiegel that its opportunity to cure the breach expired on 3 October. On that date Spiegel notified plaintiff that it would stand by its position. Prior to 3 October 1955 plaintiff did not know whether the breach would be cured or not. Hence, acceptance of rents in August and September 1955 did not waive its rights, but when 3 October came and passed, plaintiff was required to elect whether it would continue with the contract or maintain its position that there was no longer any contractual relations existing between it and the defendants. Two roads were open. Plaintiff had the right to choose which route it would take. Plaintiff says that the rent payments were but the contractual obligation of Spiegel, and hence there was no waiver of its rights; but Spiegel had no contractual obligation if no contract any longer existed. Its obligation to pay rents was based on the continued existence of the contract. If and when the contract terminated and Spiegel or Morrision remained in possession, their possession was wrongful, and plaintiff was entitled to recover from them damages for wrongful possession, not rent. Damages and rent are different. Stacy, C. J., speaking in Seligson v. Klyman, 227 N.C. 347, 42 S.E.2d 220, 222, said: "The law is well settled that from a lessee who wrongfully holds over, the landlord is not only entitled to obtain possession of his property, but also to recover indemnity for its wrongful detention. McGuinn v. McLain, 225 N.C. 750, 36 S.E.2d 377; Allen v. Taylor, 96 N.C. 37, 1 S.E. 462; Annotation A.L.R. 386. This is not necessarily the stipulated rent in a lease for a time prior thereto. * * * Indemnity or compensation, rather than rent, would seem to be the proper measure of recovery."

The acceptance of rents subsequent to 3 October 1955 including the substantial sum in excess of the minimum paid for the use of the property for the year ending 31 October 1955 which included three months' occupancy by Morrison constituted a waiver of the breach and a recognition by plaintiff that the contract remained in effect. After this action was instituted and after the defendants had expressly pleaded the acceptance of rents as a waiver of plaintiff's right to assert a forfeiture, plaintiff continued to accept rents for several *879 months and practically up to the time of the trial.

The doctrine of election and waiver has been applied in other factual situations where one is required to make a choice. Illustrative are Hutchins v. Davis, 230 N.C. 67, 52 S.E.2d 210; Parker v. White, 235 N.C. 680, 71 S.E.2d 122; Benton v. Alexander, 224 N.C. 800, 32 S.E.2d 584, 156 A.L.R. 814; Macbeth-Evans Glass Co. v. General Electric, 6 Cir., 246 F. 695.

While plaintiff, by the acceptance of rent, has waived its right to object to the assignment, it has not released Spiegel of any of its contractual obligations. Its refusal to accept payment of the rent from Morrison was notice to Spiegel that it would be held to a compliance with all of its contractual obligations. Spiegel has properly recognized its responsibility to plaintiff under the contract. It must, of course, comply with each of its contractual obligations. Fidelity Bank of Durham v. Bloomfield, N.C., 98 S.E.2d 865; Childs v. Warner Bros. Southern Theatres, 200 N.C. 333, 156 S.E. 923; Connolly v. Rogers, 292 Mass. 140, 197 N.E. 483, 100 A.L.R. 552, and annotations; Maybury Shoe Co. v. Rochester Factory Holding Co., 88 N.H. 172, 185 A. 654; 32 Am.Jur. 313, 314; 51 C. J.S. Landlord and Tenant § 45, p. 574.

There was error in the conclusion that plaintiff had not waived its right to declare a forfeiture and that it now had the option of declaring a forfeiture. On the facts found the court should have concluded that plaintiff had waived its right to object to the assignment, that the contractual relationship created by the original lease, with the obligations there assumed by Spiegel and plaintiff continued in full force and effect.

Error and remanded.

HIGGINS, Justice (dissenting).

The plaintiff had a rental contract with Spiegel which called for the payment of $1,250 per month plus a percentage of the sales above a fixed amount. The total annual rental amounted to about $35,000. The lessor is a large corporation with a net worth of more than $40,000,000, with vast experience and a history of splendid success in the retail sales of furniture. The plaintiff is and has been willing to continue this rental contract with Spiegel.

However, this controversy arose by reason of the refusal of the lessor to approve a sublease to Morrison-Neese, a new corporation with $32,000 capital and its prospects of success questionable. Approximately two-thirds of the plaintiff's rent came from the percentage on sales. The plaintiff, therefore, has a vital interest in the amount of sales. It cannot in good conscience be expected to approve a transfer of the business to another tenant whose prospects are doubtful. The plaintiff refused to receive rent from the sublessee but continued to receive payments from the original lessee. In my opinion the trial court's finding that the plaintiff had not waived its right to refuse approval of the transfer is supported by competent evidence.

There is some question about the form of the judgment. I vote to modify and affirm.