Green v. Millman Brothers, Inc. , 7 Mich. App. 450 ( 1967 )

7 Mich. App. 450 (1967) 151 N.W.2d 860

GREEN
v.
MILLMAN BROTHERS, INC.

Docket No. 2,330.

Michigan Court of Appeals.

Decided July 20, 1967. Rehearing denied August 25, 1967. Leave to appeal denied October 26, 1967.

Milton M. Maddin, for plaintiff.

Norman Rom, for defendant.

Leave to appeal denied October 26, 1967. See 379 Mich 786.

LESINSKI, C.J.

Defendant Millman Brothers, Inc., a Michigan corporation, appeals from a decision of the common pleas court for the city of Detroit, in favor of plaintiffs Abe Green, Rose Green and Henry S. Alper. The plaintiffs are the owners and operators of the Wonderland Shopping Center in the city of Livonia, Michigan.

The dispute arose out of a written lease agreement between the plaintiffs, as landlords, and the defendant, as tenant. The lease was entered into on July 8, 1958, for a term of 20 years to commence April 1, 1960. The annual rental of $12,250.08 was payable in monthly installments of $1,020.84 in advance, the first day of each month. A provision for additional rent to be paid on gross sales is not here involved.

The defendant paid the stipulated monthly rental from April 1, 1960, until February of 1963. In 1962, and 1963, the president of the defendant corporation had several conversations with Henry S. Alper, the general manager of the shopping center, relative to a reduction in the annual rent. No agreement was reached until April, 1963, when an oral understanding was arrived at whereby the monthly rental was to be reduced by $150 commencing March 1, 1963. The defendant contends that the reduction in monthly rental was for the remaining term of the lease; however, the plaintiffs deny this and assert that the reduction was for one year only. Based on the oral agreement, defendant issued a check dated April 1, 1963, in payment of the reduced monthly rental. Defendant continued such payments until February, 1966, for a total of 36 checks.

The reverse side of the checks bear a notation indicating that each check was for the rent of a given month and year. The checks were accepted and cashed by the plaintiffs.

Several months after the expiration of the one-year period, for which they admit the rent was reduced, the plaintiffs made demands for deficiency of $150 per month. Such demands were denied by the defendant.

On February 21, 1966, the plaintiffs brought suit to recover alleged accumulated deficiencies covering the period from March, 1964, to February, 1966, totaling $3,600. The defendant filed an appearance and answer in the lower court alleging that the oral agreement for reduction of rent was not for one year, as the plaintiffs contended, but for the balance of the lease; that the delivery of the checks to the plaintiffs and the subsequent cashing by them operated as an estoppel to prevent the recovery of any deficiency for the period in dispute; and that the receipt of the checks at the reduced rental was an accord and satisfaction of defendant's obligation during the period that such checks were received and deposited.

The trial court sustained plaintiffs' right to recovery and entered a judgment against the defendant in the amount of $3,600. It is from this decision that the defendant brings the present appeal.

In its first assignment of error, the defendant contends that the trial court erred in deciding that the oral agreement in dispute was not supported by consideration. Defendant contends that its continued tenancy, after indicating its desire to vacate, supplied the consideration for the subsequent oral agreement for reduced rental.

To decide defendant's first argument on appeal, it is necessary to consider CL 1948, § 566.1 (Stat Ann 1953 Rev § 26.978[1]).^[1] From a reading of this statute, it is clear that it does not apply to an oral modification of a written lease agreement. The question then for this Court is whether the subsequent oral modification was supported by consideration.

The performance of a pre-existing duty or legal obligation is generally held not to be sufficient consideration for a return promise. 17 Am Jur 2d, Contracts, § 119, p 465, reads: "The general rule is that a promise to do that which the promisor is legally bound to do, or the performance of an existing legal obligation, does not constitute consideration, or sufficient consideration, for a contract." Also, see Puett v. Walker (1952), 332 Mich 117.

The defendant claims that its continued occupancy formed the consideration for the oral agreement for reduced rental. In support of its claim the defendant directs our attention to Minor-Dietiker v. Mary Jane Stores of Michigan, Inc. (1966), 2 Mich App 585. There, as here, the disputed question was an oral agreement that called for a reduction of stipulated rental price in a prior written lease. This Court's holding in Minor-Dietiker, supra, is not applicable to the fact situation presented by the instant case.

In Minor-Dietiker, supra, although the lessee had covenanted to pay stipulated rentals during the term of the lease, it had not made a covenant to remain in actual occupancy. Therefore, the lessee's subsequent refraining from vacating, at the behest of the lessor, formed the necessary consideration for the oral agreement to reduce the monthly rental. The lessee in agreeing to remain in the premises was forbearing from doing that which it had every legal right to do, even though it might have had a continuing liability for the payment of rent.

Cases in this State which make a distinction between a covenant to pay rent and occupy the premises and a covenant which relates only to the payment of rent are sparse. This Court, however, deems it a valid distinction. Where the covenant is twofold, to pay rent and to occupy, the subsequent agreement to remain in occupancy cannot form the consideration for an oral agreement to reduce rental because the lessee is already obligated contractually to remain. However, if the covenant is to pay the stipulated rental only, the decision of the lessee to remain in occupancy may be a distinct advantage to the lessor and would provide the necessary consideration for an agreement to reduce the rental. See Copper v. Fretnoransky (1892), 16 NYS 866; Ten Eyck v. Sleeper (1896), 65 Minn 413 (67 NW 1026).

In the instant case the defendant convenanted not only to pay the stipulated rental but also to "operate 100% of the leased premises during the entire term of this lease." Consequently the defendant's agreement to remain in possession of the premises did not supply the consideration for the subsequent oral agreement for reduced rental. See 5A Corbin, Contracts, § 1249.

It is necessary to distinguish the instant case from those where the lessee experiences unforeseeable conditions or hardship and as a consequence of concessions as to rental, agrees to continue occupancy and meet the new difficulties. The failure of the location under lease here to be productive of a volume of business such as would produce a profit was not such an extraordinary or unforeseen condition as would fall within the ambit of the aforementioned exception.

For this Court to hold that the failure to carry out a party's threat to breach a contract in writing, barring unforeseen or extraordinary circumstances, is valid consideration for oral concessions made by the other party to prevent such breach, would destroy the stability of written contracts in this State.

In defendant's second assignment of error, it contends that the receiving and subsequent cashing of the checks in question for a period of 24 months after the one-year period operated as an estoppel to prevent the plaintiffs from seeking deficiencies in rental during that period.

To substantiate its argument, the defendant directs our attention to Zannis v. Freud Hotel Co. (1932), 256 Mich 578. The Zannis decision, at 586, stated: "the theory of estoppel has been frequently recognized and parties have not been permitted to escape their obligations when they have stood by and acquiesced or received a consideration from contracts that they subsequently seek to avoid because they do not conform with the statute of frauds."

The doctrine of estoppel by "standing by" or "acquiescence" presupposes, among other things, that the party against whom the doctrine is asserted was guilty of such inaction. In the instant case this behavior cannot be attributed to the plaintiffs if the trial court chose to believe the witness of the plaintiff and give credence to the exhibits admitted into evidence. In a letter dated April 27, 1964, addressed to the defendant and signed by Louis Segal, the manager of the plaintiffs' shopping center, the defendant was put on notice that the plaintiffs considered it to be in arrears as to rental. Again on January 26, 1965, another letter addressed to the defendant and signed by counsel for the plaintiffs, Milton M. Maddin, informed the defendant that if arrearages were not satisfied promptly then necessary steps would have to be taken to accomplish collection. Again on February 23, 1965, there was communication between counsel for the respective parties that indicated the defendant's delinquency as to rental.

A further limitation on the doctrine of estoppel is that the acceptance of a benefit under a contract to which the party is entitled in any event does not bring about the operation of estoppel. "The payment of a valid and undisputed past-due debt cannot be the basis of an estoppel, and an acceptance of a portion of that to which a party is entitled, unless it is done by way of compromise and settlement or accord and satisfaction, is not a bar to the subsequent assertion of a claim for the balance, especially where such acceptance is accompanied by an express reservation of rights or where it is manifest that the party does not intend to surrender them." 28 Am Jur 2d, Estoppel and Waiver, § 60, pp 680, 681. See, also, Grand Trunk Western R. Co. v. H.W. Nelson Co., Inc. (CA 6, 1941), 116 F2d 823; Knoop v. Penn Eaton Motor Oil Company, Inc. (1951), 331 Mich 693. In line with this reasoning, the plaintiffs were not only entitled to the money they received, but made it abundantly clear that they were not relinquishing their rights to the herein disputed deficiencies.

Finally the defendant contends the acceptance by the plaintiffs of the rental payments, during the period such payments were received, amounted to an accord and satisfaction. We find no merit to this position. The oral agreement, as previously stated, was not supported by consideration. Consequently, the original lease agreement was determinative of the defendant's obligation and its tendering of checks at the reduced amount was partial payment of that which it was already contractually bound to pay. The acceptance and retention of the checks would not come within the rule of accord and satisfaction because, as this Court has stated in Kirby v. Monroe Paper Products Company (1965), 1 Mich App 680, an accord and satisfaction requires consideration. See, also, Puett v. Walker, supra.

Defendant relies on Hoey v. Ross (1915), 189 Mich 193, in support of its contention that the acceptance of the checks with the legend on the reverse side indicating it was payment in full, constituted an accord and satisfaction. The rule of Hoey, supra, is that acceptance and retention by a creditor of a check tendered by the debtor in satisfaction of a disputed indebtedness, accompanied by a condition to that effect, operates as an accord and satisfaction of the debtor's obligation. The distinguishing feature of Hoey, supra, is that the amount owing was never determined, as the parties differed as to the manner for determining the amount due, unlike the case before us which was founded on a written lease. The dispute here was whether the oral modification was for a year or for a longer period.

We conclude that the payments made by the defendant operated only as a payment pro tanto of its obligation and that it is accountable for the deficiencies herein claimed by the plaintiffs. See Monroe v. Bixby (1951), 330 Mich 353, and cases cited therein.

Assuming, arguendo, that there was consideration present, the acceptance and retention of the checks by the plaintiffs would not in any event cause the operation of the rule of accord and satisfaction. A requisite for the operation of this rule is that there be a meeting of the minds of the parties. See Obremski v. Dworzanin (1948), 322 Mich 285; Stadler v. Ciprian (1933), 265 Mich 252; Flanders Co. v. Canners' Exchange Subscribers at Warner Inter-Insurance Bureau (1926), 235 Mich 157. In the instant case from the testimony and evidence presented at trial, there was no meeting of the minds, even by implication. This is evidenced by the correspondence between plaintiffs and defendant and further by the business records kept by the plaintiffs indicating that always during this period the defendant was considered in arrears.

It is the decision of this Court, based upon the aforementioned considerations, that the result reached by the trial court was correct.

Affirmed. Costs awarded to appellees.

FITZGERALD and J.H. GILLIS, JJ., concurred.

NOTES

[1] "An agreement hereafter made to change or modify, or to discharge in whole or in part, any contract, obligation, or lease, or any mortgage or other security interest in personal or real property, shall not be invalid because of the absence of consideration: Provided, That the agreement changing, modifying, or discharging such contract, obligation, lease, mortgage or security interest shall not be valid or binding unless it shall be in writing and signed by the party against whom it is sought to enforce the change, modification, or discharge."