KPC Corp. v. Book Press, Inc.

KPC_CORP_V_BOOK_PRESS_INC.92-402; 161 Vt. 145; 636 A.2d 325

[Filed 05-Nov-1993]

 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P.
 40 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.


                                 No. 92-402


 KPC Corporation                              Supreme Court

                                              On Appeal from
      v.                                      Windham Superior Court

 The Book Press, Inc. et al.                  September Term, 1993



 Silvio T. Valente, J.

 John H. Carnahan of Fitts, Olson, Carnahan & Giddings, Brattleboro, and
    Lawrence J. Gebhardt of Gebhardt & Smith, Baltimore, Maryland, for
    plaintiff-appellee

 Charles N. Hurt, Jr. of Downs Rachlin & Martin, St. Johnsbury, for
    defendant-appellant



 PRESENT:  Allen C.J., Gibson, Dooley and Morse, JJ. and Grussing, D.J.,
           Specially Assigned



      GIBSON, J.   Book Press, Inc. appeals from a judgment in favor of KPC
 Corporation holding Book Press liable under the terms of its lease with KPC
 to pay 110% of the basic rent due until the lease expires in the year 2005,
 and to pay certain sublease net profits.  We affirm.
      Book Press is a printing company owned by Quebecor America, Inc.  In
 1980, Book Press contracted with Devon Group, Inc., to lease an industrial
 building in Brattleboro, Vermont.  Subsequently, Book Press sublet a portion
 of the premises to C & S Wholesalers, and KPC acquired the building subject
 to the lease and sublease.

 

      Article 22.01(a) of the lease between Book Press and KPC provides in
 relevant part that an "Event of Default" occurs when "[t]he Tenant shall
 default in making the payment of any instalment of the Basic Rent . . . and
 such default shall continue for a period of twenty (20) days."  The lease
 imposes a late charge of 3% on payments made more than ten days after the
 due date, provides for 12% interest on late payments, and states in Article
 22.01:
                   [I]f Tenant shall default (i) in the timely payment of
                   Basic Rent or Additional Rent, and any such default
                   shall continue or be repeated for two consecutive months
                   or for a total of four months in any period of twelve
                   months or (ii) more than three times in any period of
                   six months . . . then, notwithstanding that such de-
                   faults shall have each been cured within the applicable
                   period . . . any further similar default shall be deemed
                   to be deliberate and Landlord thereafter may either (i)
                   serve . . . 10 days' notice of termination upon Tenant .
                   . . or (ii) by written notice to Tenant, increase the
                   Basic Rent . . . to 110% of the Basic Rent reserved in
                   Article 5 hereof.
 Article 5 sets forth the schedule of basic rent due over the term of the
 lease, showing increases in basic rent due on September 1 of each year
 beginning in 1986.
      Article 17 of the lease requires the landlord's consent for any
 sublease and requires the tenant to pay "additional rent" to the landlord in
 the amount of any net profits, after costs and expenses, that the tenant
 realizes from its sublease.  The previous landlord, Devon Group, waived its
 right to collect net profits from the sublease between Book Press and C & S.
      In September 1988, Book Press submitted to KPC for its consent a
 proposed extension of the sublease to C & S.  In granting its consent, KPC
 expressly reserved its right to receive net profits from the sublease.  In
 December, C & S notified Book Press, but not KPC, that it would move out of

 

 the building in March 1989.  KPC did not learn of the move until June 1989,
 at which time it requested payment of net profits from Book Press, which
 responded that it would not pay net profits because the requirement had been
 waived.
      In September 1989, the rent payment from Book Press was late and for an
 incorrect amount according to the scheduled increase set forth in Article 5
 of the lease.  KPC sent a notice of default, and Book Press responded that
 it had paid the rent and owed nothing further.  The rent payment was late
 again in October and again for an incorrect amount.  Incorrect amounts were
 also paid in November and December.  KPC thereupon sent a notice of
 increase, stating that it was electing to increase the basic rent by 10% as
 it had a right to do under the lease.
      When the rent payment for January 1990 was again remitted for an
 incorrect amount, KPC commenced this lawsuit.  The February rent payment was
 also incorrect, but later in the month Book Press discovered its mistake and
 remitted to KPC the amount of increased basic rent it had failed to pay for
 the preceding months plus a 3% late charge and 12% interest.  This payment
 did not include the 10% increase.  KPC pressed its lawsuit on the grounds
 that Book Press owed it both the 10% increase in basic rent and the net
 profits from the sublease with C & S.
      The trial court found in favor of KPC on both the rent increase and the
 net profits issues, and Book Press appeals.  It contends (1) that KPC
 waived its right to collect the 10% increase in basic rent when it accepted
 rent checks for the basic amount, (2) that the 10% increase provision in the
 lease is unconscionable, and (3) that KPC waived its right to net profits
 from the sublease when it delayed its demand for payment until after C & S

 

 had vacated the premises.  We shall consider the waiver issues in turn, then
 proceed to the issue of unconscionability.  The trial court's findings of
 fact will be upheld unless there has been clear error.  V.R.C.P. 52(a)(2);
 Cab-Tek, Inc. v. E.B.M., Inc., 153 Vt. 432, 434, 571 A.2d 671, 672 (1990).
      Book Press first contends that the trial court erred in not holding
 that by accepting rent checks KPC waived its right to increase the rent by
 10%.  The court made no findings on this issue, but did find that KPC
 accepted rent checks without waiving its right to net profits.  This
 finding, in addition to the lease provisions, the notice of default of
 September 1989, and the notice of increase in basic rent of December 1989
 clearly support the court's conclusion that no waiver occurred when KPC
 accepted the rent checks.  See Wells v. Village of Orleans, Inc., 132 Vt.
 216, 222, 315 A.2d 463, 467 (1974) (despite failure of court to make
 findings on particular issue, other findings plus record showed that
 defendant failed to meet its burden of proving affirmative defense).
      A waiver is a voluntary relinquishment of a known right.  North v.
 Simonini, 142 Vt. 482, 485, 457 A.2d 285, 287 (1983).  Book Press relies on
 the well-settled contract principle that "a term in an executory contract
 may be waived if one party continues performance under the contract knowing
 that the other party has failed to perform under the term."  Lemnah v.
 American Breeders Serv., Inc., 144 Vt. 568, 578-79, 482 A.2d 700, 706
 (1984).  This principle applies, however, only "'in the absence of an
 assertion of [the non-breaching party's] intention to retain the rights
 accruing to him as a result of [the] breach.'"  Id. at 579, 482 A.2d  at 706
 (quoting John B. Robeson Assocs. v. Gardens of Faith, Inc., 172 A.2d 529,
 533 (Md. 1961)).

 

      The lease between KPC and Book Press provides that if defaults occur,
 the landlord may choose to increase the basic rent by 10%, "notwithstanding
 that such defaults shall have each been cured during the applicable period."
 In Article 31, the lease states:  "A receipt by the Landlord of Basic Rent
 or Additional Rent with knowledge of the breach of any covenant hereof
 shall not be deemed a waiver of such breach."  KPC's notice of default of
 September 27, 1989  stated:  "Landlord does not waive the defaults, and
 Landlord hereby reserves and does not waive any remedies . . . including . .
 . its right to increase the rent . . . ."   And, on December 12, 1989, KPC
 notified Book Press that it was electing to increase the basic rent by 10%,
 stating:  "Notwithstanding . . . any further payments of rent or additional
 rent, Landlord does not waive the defaults, and Landlord hereby reserves and
 does not waive any remedies available to it under the Lease . . . ."  The
 lease and the notices clearly show the intention of the landlord to retain
 and not to waive its remedies for breach even if it continued to accept rent
 payments from the tenant.
      Book Press nevertheless directs us to cases it claims support the
 proposition that a landlord waives a right to additional sums when it
 accepts rent payments for less than the amount claimed to be due.  The cases
 are inapposite, however; they concern the waiver of a landlord's right to
 terminate a lease or to serve a notice to quit.  See, e.g., Zurmuhlen v.
 Uchida, 153 Vt. 165, 169, 569 A.2d 480, 482 (1989) (right to terminate lease
 was waived when landlord failed to claim forfeiture promptly following
 breach); Rosenberg v. Taft, 94 Vt. 458, 466, 111 A. 583, 586 (1920) (when
 lessors accepted part payment of rent due, they waived right to forfeiture
 of lease); Murphy v. Little, 69 Vt. 261, 263, 37 A. 968, 968 (1897)

 

 (landlord's acceptance of rent payments was accord and satisfaction of
 disputed rent amounts and operated as waiver of previous notice to quit and
 of proposed increase in rent).  It may be that by accepting rent checks KPC
 could not have exercised its option to terminate the lease, but that is not
 what KPC chose to do.  More to the point, but no more helpful to Book Press,
 is our recent decision in Frangiosa v. Kapoukranidis, ___ Vt. ___, ___, 627 A.2d 351, 355 (1993), holding that a creditor may accept a check tendered in
 full payment of a disputed debt, and the acceptance will not operate as
 accord and satisfaction provided the creditor clearly and explicitly makes
 it known that the check is not accepted in full payment of the debt.  We
 find no merit to the argument that KPC waived its right to the 10% increase
 provision by accepting rent checks from Book Press.
      Book Press contends also that the trial court erred when it found that
 KPC did not waive its right to collect net profits from the tenant's
 sublease to C & S.  The right to receive net profits from Book Press's
 sublease with C & S had been waived by the previous owner of the building,
 Devon Group.  When, as the new owner of the building, KPC consented to the
 extension of the sublease, it did so with the following express reservation:
 "The foregoing Consent of Owner shall not be deemed a waiver by Owner of any
 obligations of Tenant arising under said Net Lease, specifically those
 referenced in Article 17."
      The trial court found no waiver in KPC's consent to the sublease,
 concluding that, under the terms of Article 17, Book Press owed KPC net
 profits from the sublease with C & S.  The court also held, however, that
 the original waiver by Devon Group was effective until the original sublease
 terminated.   KPC could therefore collect net profits only for the period

 

 September 1, 1988, when the extension took effect, through March 31, 1989,
 when C & S vacated the building.  Book Press argued that it did not owe even
 these net profits because KPC had waived its right to collect them by
 waiting too long before demanding payment.  Book Press pointed out that KPC
 did not demand payment of net profits until June 1989, almost nine months
 after it had consented to the extension of the sublease.
      The trial court found that the lease did not require the landlord to
 demand payment of net profits at any specific time, that the delay by KPC
 was due to the fact that it did not learn of the termination of the sublease
 until June, and that it was reasonable in any case for KPC to wait until
 expiration of the lease.  We find no error in the court's conclusion that
 sublease profits are due for the specified period.
      The final issue is unconscionability.  Where the terms of a lease are
 plain and unambiguous, they will be given effect and enforced in accordance
 with their language.  Brownell v. Burlington Fed. Sav. & Loan Ass'n, 115
 Vt. 455, 458, 63 A.2d 862, 864 (1949).  Book Press contends that the lease
 provision allowing the landlord to increase the basic rent by 10% upon
 default is substantively unfair and that the increase in this case was an
 unfair surprise.  See 9A V.S.A. { 2-302(1) (court may refuse to enforce
 unconscionable contract or clause).
      The trial court found that the terms of the quoted portion of the lease
 were plain and unambiguous, and that an "event of default" occurred twenty
 days after Book Press failed to pay the correct basic rent for September
 1989.  KPC's notice of September 27, 1989 stated that Book Press was in
 default for "failure to pay basic rent for September 1989, when due,
 pursuant to Article 5.01."  Despite this notice, Book Press continued to pay

 

 incorrect basic rent for October, November and December of 1989, and
 January and February of 1990, and this also constituted default according to
 the lease.  The court concluded that KPC was within its rights when it chose
 to raise the basic rent by 10% as the lease provided.
      Book Press argues that the basic rent increase provision was
 substantively unfair and that the term is therefore unconscionable.  See
 Val Preda, 149 Vt. at 135, 540 A.2d  at 652 (substantively unfair terms
 support finding of unconscionability regardless of presence or absence of
 other enumerated factors of unconscionability at formation of contract).  We
 agree with the trial court, however, that Val Preda is  distinguishable from
 this case.  In Val Preda, we held that a car rental agreement was
 substantively unfair where it appeared on its face to absolve a renter of
 liability if the renter purchased a "collision damage waiver," but contained
 on its reverse side a list of exceptions to this waiver so extensive as to
 virtually nullify the waiver.  Id. at 132-33, 540 A.2d  at 650.  We held the
 agreement unfair because an "average renter would have difficulty in
 understanding the consequences of the substantial exceptions to the
 limitation on liability." Id. at 135, 540 A.2d  at 652.
      Here, by contrast, the parties were sophisticated business persons
 acting with the assistance of able counsel.  Indeed, after receiving a
 notice of default in September 1989, Book Press responded through its
 attorney that it had paid the rent due, and then proceeded to pay incorrect
 amounts for the next five months.  On these facts, we think Val Preda hardly
 applies.
      We likewise find no merit in Book Press's contention that application
 of the 10% increase provision constitutes unfair surprise.  Its argument is

 

 based on the fact that KPC's default notice did not refer specifically to
 the increased basic rent, thereby leading Book Press to believe that default
 was based only on late payments.  In considering whether a party has been
 unfairly surprised by a contract term or its application, we take into
 account the party's relative business experience and education, the party's
 opportunity to understand the terms of the contract, and whether the terms
 were hidden in the fine print.  Lamoille Grain Co. v. St. Johnsbury &
 L.C.R.R., 135 Vt. 5, 9, 369 A.2d 1389, 1391 (1976).
      Although KPC's notice of September 27, 1989 did not literally inform
 Book Press that it had sent the incorrect amount of rent, the notice clearly
 directed Book Press's attention to the table in the lease, at Article 5.01,
 in which rent increases were set forth.  Book Press shared the
 responsibility to determine the proper rent amount and could easily have
 done so.  Moreover, there had been increases in basic rent in September of
 each of the preceding three years.  We note once again that upon receipt of
 this notice Book Press chose merely to respond that it was not in default.
 It is true that in this case a 10% increase in rent over the remaining term
 of the lease amounts to a considerable sum of money, almost $1.5 million
 dollars.  Nevertheless, the lease has been in existence since 1980, and the
 increase provision has never been altered.  Absent poor education or hidden
 terms or lack of opportunity to read the lease, none of which are asserted
 by Book Press, we cannot say that the effect of the provision, however
 shocking to Book Press, was unfair or a surprise.
      Book Press makes a further argument regarding misrepresentations by the
 president of KPC, and contends that even if we find that sublease profits
 are due, the maximum amount owed is $18,000.  These assertions appear in the

 

 brief unaccompanied by facts, law, or reasoning, and therefore need not
 detain us.  See Bishop v. Town of Barre, 140 Vt. 564, 579, 442 A.2d 50, 57
 (1982) (Court will not search record for errors inadequately briefed).  The
 lease is plain and unambiguous, KPC's consent letter is equally plain, and
 we find no error in the trial court's calculation of the net profits owing
 to KPC.
      Affirmed.


                                    FOR THE COURT:


                                    _______________________________________
                                    Associate Justice