Mallard v. Duke , 131 S.C. 175 ( 1925 )

February 12, 1925. The opinion of the Court was delivered by "This is an action for the recovery of the rental of a brick building leased by plaintiff to defendants. The complaint alleges that on May 15, 1920, the parties entered into a written lease for a period of three years, beginning June 1, 1920, or as soon thereafter as the building should be completed; that the building was completed and defendants went into possession on July 1, 1920; that they remained in possession and paid the rent up to January 31, 1922, but failed to pay the rent for the period from February 1, 1922, to January 31, 1923, for the collection of which the action is brought."

The defendants, by their answer, "denied liability on two grounds: (1) Because the landlord had failed to complete the building according to agreement, by reason of which failure the building turned out to be unfit for use, and the tenants vacated on that account; (2) because the building became untenantable within the meaning of the lease, on which account they vacated, and were thereby absolved from further liability for rent under the terms of the lease. The tenants also interposed a counterclaim based on the fact that they had put an expensive tile floor in the building, the value of which was lost to them by reason of their having to vacate."

The rulings of the trial Court which are charged to be erroneous, and the contentions thereupon predicated, are thus stated by appellants' counsel:

"His Honor, the trial Judge, let in the evidence to sustain the first defense and the counterclaim, but, when he refused to direct a verdict for plaintiff, he stated that he would not submit to the jury either the first defense or the counterclaim, but only the second defense, and that, in connection with it, he would charge the jury that, even if they found the premises were untenantable, their verdict should be for the plaintiff for the full amount of the rent if they found that defendants had waived their right to vacate by remaining in possession after discovering the condition of the premises. When he came to charge the jury, these were the only issues submitted to them. Defendants contend that his Honor was in error in withdrawing the first defense and the counterclaim from the jury, and in charging that the law of waiver was applicable to the second defense. There are other questions raised by the appeal, which will be hereafter considered, but the main questions are those just stated."

The facts, broadly outlined, out of which the controversy arises, are as follows: The lease was of a two-story brick building then in process of erection, entered into on May 15, 1920, for a term of three years and provided that rent should "commence the 1st day of June, 1920, or as soon as the building is completed." The defendants were permitted, over plaintiff's objection, to introduce testimony to the effect that, prior to or at the time of the making of the written contract, the plaintiff's agent assured them that the building "would be first class in every particular and up to date." The building was leased for the purpose of operating therein a tearoom or restaurant. Before signing the lease the defendants inspected the building. One of the defendant's witnesses testified:

"The lease was signed up after we had gone over the building; the walls were up and the roof was on, but the floors had not been put down. The outside part was finished, but there was considerable inside work to do."

"Before taking possession the premises were frequently visited by defendants. On July 1, 1920, defendants took possession. From the outset they failed to pay the rent stipulated in the contract. The plaintiff allowed a deduction from the July rent of $125, on account of delay. A controversy as to alleged defects in the building arose and continued until December 31, 1920, on which date a compromise settlement was effected. By the terms of this settlement, conducted by the attorneys of the respective parties, the plaintiff made an additional allowance, or deduction, for rent due under the contract, of $650, and the defendants agreed "to resume payment of rent, according to the terms of the lease, on January 1, 1921." Thereafter they paid the rent each month. On January 1, 1921, the defendants sublet the first floor to one Gaddy, and thereafter operated their tearoom on the second floor until March 1, 1921, when they moved to the Ottaray Hotel and sublet the second floor. On February 1, 1922, Gaddy vacated. Defendants thereupon repudiated the lease, tendered the keys to the building, and refused to make further payments of rent. Subject, as she avers, to the understanding that such action should be without prejudice to either side, plaintiff undertook to relet the property. Subsequently this action was brought to recover the rent alleged to be due by defendants for the period of time covered by the lease, commencing February 1, 1922, when the premises were abandoned.

Assuming, for the purpose of this opinion, that the points made and the questions discussed in appellants' printed argument are sufficiently raised by the exceptions, those contentions will be considered in the order presented in argument.

The first defense, directed to the contention that there had been a failure on the part of the plaintiff to complete the building in accordance with the representation of the plaintiff's agent that the completed building would be first class and modern in every respect, is predicated upon evidence which appellants say was to this effect:

"That the landlord's architect planned to waterproof the exposed western wall with plaster board and cement, to build up the flues above the parapet and put caps on them, and to install a ventilator on the first floor; that he was taken off the job by the landlord after the lease was signed but before the building was completed; that these things were never done; that had they been done the interior of the building would have been dry in wet weather; that the failure to do them resulted in rain water penetrating the walls and moisture condensing on the walls, rendering the premises uncomfortable and dangerous to health and useless for a tearoom, or any ordinary use; and by reason thereof the defendants and their subtenants vacated and surrendered the premises."

The alleged misrepresentation of plaintiff's agent as to the general character of the completed building is charged in the answer to have been such a fraudulent misrepresentation as entitled the defendants to a rescission of the contract for fraud. That the foregoing evidential showing by defendants was not of itself sufficient to support an inference of fraud would seem too clear to warrant discussion; nor does the record disclose other evidence which, considered in connection with the testimony of defendants above referred to, would warrant a finding of fraud. The alleged representation was at most a mere promise as to a future event or condition, the alleged nonfulfillment of which involved details of architectural construction and supposed consequences which it does not appear that either the plaintiff or her agent had in mind, or could reasonably have foreseen, at the time the representation was made. There is, as we think, not the slightest basis in the evidence for a finding that the alleged representation was not made in good faith or that it was part of a general fraudulent design to induce the execution of the contract. Coleman v. Stevens, 124 S.C. 8, 15, 16,117 S.E., 305. Livingston v. Reid-Parr Co., 117 S.C. 391;109 S.E., 106. See, also, as to tenant's right to rely on such representations generally, 16 R.C.L., 781, § 274.

That the evidence adduced was not sufficient to warrant a finding that defendants were entitled to a rescission or to other relief for fraud appears to be virtually conceded in the argument of counsel; but it is insisted that the representation of plaintiff's agent that the completed building would be first class, etc., constituted a collateral agreement, the legal effect of the breach of which was to work a constructive eviction or, in any event, to entitle defendants to recoup their damages from such breach in an action by the landlord for the rent. In appraising that proposition it is apparent that the first of appellants' premises — that the oral promise or warranty was a collateral agreement which could be proved without infringing the parol evidence rule — presents a serious question. It is contended that the nature of the alleged agreement was essentially identical with that of an oral promise to repair or to make improvements during the term of a written lease, parol evidence of which has been expressly held admissible by this Court. Williams v.Salmond, 79 S.C. 459; 61 S.E., 79. Holliday v. Pegram,89 S.C. 73; 71 S.E., 367, Ann. Cas., 1913A, 33. We are of the opinion, however, that the application of the rule announced in the cases cited — a rule which is perhaps not in accord with the weight of authority elsewhere (see 16 R. C.L., 703, § 192; note, Ann. Cas., 1913A, 39) — does not require the conclusion that the verbal statement here in question was properly provable as a collateral agreement. The extent, as we apprehend, to which our decisions go in approving the admission of parol evidence of a contemporaneous contract on the part of the landlord to make repairs, etc., is to hold that such evidence is admissible where the written lease makes no reference to the subject of repairs or to the other extraneous subject of the alleged verbal agreement. Thus, as was said in Holliday v. Pegram,supra:

"If there is a lease in writing, which makes no referenceto repairs, the lessee is not precluded from introducing parol testimony to show that, as a part of the consideration of the agreement to pay rent, the lessor promised to make repairs." (Italics added.)

Since the law does not imply an obligation on the part of a landlord to repair or improve or to make the premises suitable for the lessee's purposes (Williamsv. Salmond, supra; 16 R.C.L., 772, § 268), there can be no doubt that an agreement as to those matters may logically be regarded as collateral to a written lease which is wholly silent on those subjects. But, if the salutary rule of evidence excluding extrinsic evidence to vary a written contract is to avail anything in this field of contractual relations, it is obvious that to justify the admission of a parol promise by one of the contracting parties to a written lease, on the ground that the promise was collateral, the promise must not only be collateral, but should relate to a subject distinct from that to which the written contract refers or applies. If the alleged promise of the plaintiff to provide an up-to-date first-class building be construed to mean what the defendants say it means — the assumption of an obligation to raise and cap the flues, to cement the outside of a brick wall, and to install a ventilator — that promise related to a subject concerning which the parties would seem plainly to have undertaken to express and define their mutual obligations in the written contract. At the time of the making of the contract the walls were finished, the flues constructed, the roof on, and only the inside work remained to be completed (W.L. Luther). In that situation the parties referred to and undertook to provide in the written lease for the structural completion of the building as follows:

"Owner is to put water pipe to upstairs floor and install dumb-waiter, and to erect stairway in alley way to second floor. Tenant is to pay the difference between the cost of cement floor and tile floor on first floor."

That the foregoing provisions of the written contract related to the subject of structural completion which the defendants now say was further covered by an additional verbal agreement, we think, is sufficiently clear. That the effect of such verbal agreement, as interpreted by appellants, would be to add to and vary the terms of the written contract, is equally clear. If so, in so far as the first defense was predicated on the breach of a collateral agreement, the trial Judge's ruling in withdrawing that defense from the jury may be sustained, on the ground that the evidence adduced to establish it was inadmissible under the parol evidence rule. In that view it also follows that there was no error in the trial Court's conclusion that the counterclaim, based upon an alleged breach of the oral promise to provide "a modern, tight, and dry building," was not established.

The appellants' second main contention is that the trial Judge erred in charging the law of waiver as applicable to the defense that the building at the time of its surrender by defendants was untenantable. The lease provided:

"It is further agreed that, if said premises shall be destroyed or so injured as to render them untenantable, all parties hereto from the time of such destruction or injury are released from the terms of this lease."

The trial Court submitted the case to the jury under a charge to the effect that the only question for their determination was whether or not at the time the building was surrendered it was so injured as to be untenantable; that is, "not fit to be used for the purpose it is meant to be used and for which it is rented." That action was apparently rested upon the foregoing provision of the contract as to termination in the event of untenantability from destruction or "injury." It might well be doubted whether there was any evidence tending to establish "injury" or "destruction" within the meaning of those terms as used in the provision of the contract here invoked. 16 R.C.L., 963, 964; note, Ann. Cas., 1913A, 1100; Hilliard v. N.Y., etc., Gas C.R.Co., 41 Ohio St., 662; 52 Am. Rep., 99. But, certainly, appellants cannot complain that the case was submitted to the jury upon the theory that the evidence tending to show untenantability on account of the dampness alleged to be due to the landlord's failure to correct defects in construction, etc., was evidence of "injury," within the meaning of the contract, which would entitle defendants to terminate the lease. The submission of the case on that theory would seem clearly to have given the defendants the benefit, in large measure, of their contention that the failure of the landlord to perform her alleged agreement to furnish a "first-class" building resulted in rendering the premises untenantable and that such failure worked a constructive eviction which entitled defendants to surrender the premises.

But there was abundant evidence tending to establish that, if there was a condition of untenantability, resulting from injury or otherwise, it had existed from the beginning of the tenancy. The defendants themselves testified that the damp and unhealthful condition of the building was known to them practically from the time of entering into possession. It is admitted that that condition was known at the time of the compromise settlement of differences on December 31, 1920, six months after they took possession. That a right to terminate the lease on account of the alleged dampness and consequent untenantable condition, could be waived, and that there was abundant evidence of waiver, we think, is beyond question. 16 R. C.L., 965, § 475.

The appellants insist, however, that in view of their contention of fact, supported by evidence, that they had no knowledge that the unsatisfactory condition of the building was caused by latent defects of construction until just prior to the time of surrendering the premises, the trial Court committed prejudicial error in charging that the conduct of the tenants in remaining in possession after they knew or could have ascertained the untenantable condition would amount to waiver. We find nothing in the general charge which would warrant that construction of the Judge's instructions, certainly, when considered in connection with the defendants' fourth and fifth requests, which were thus charged by the Court:

"(4) If you find that it was not in a completed condition within the meaning of the parties when delivered to the defendants, the question then arises, Did the defendants waive the defects by going into possession under the lease? If they knew of the condition of which they now complain when they went into possession, or found it out afterwards and remained in the building knowing the condition, they have waived it. But, if it was a hidden defect and such a defect that reasonable inspection would not have disclosed it, then they did not waive it by going into possession.

"I charge you that. It is about the question of whether they waived by going in in the first instance.

"(5) It is entirely possible for a situation to arise where a tenant would know there was something wrong and yet not know what it was or what caused it. ``Waiver' is the intentional relinquishment of a known right and one must be familiar with the facts before he can be said to have waived a right upon those facts.

"I have given you the definition of waiver."

We perceive no error in the Judge's instructions as to waiver of which defendants are in position to complain, and appellants' contentions in that aspect of the case are overruled.

The next proposition argued is that the effect of restricting the issue to be determined by the jury to the questions of tenantability of the premises and waiver by defendants was to deprive the defendants of the substantial contention of fact to which their thirteenth request to charge was directed, viz.: That, where the landlord has agreed to relet the abandoned premises for the benefit of whomever might be entitled to the rental in accordance with the ultimate result of the controversy between the landlord and tenant, the landlord must exercise due diligence to rent the premises at a reasonable rental, and, "if he fails to do this, then the loss actually realized from reletting the premises is not that full measure of deduction the tenant is entitled to receive on the rent stipulated in the lease."

It is contended that there was evidence to support an inference of fact that the plaintiff had failed to exercise due diligence in securing an adequate rental from the building after the abandonment by defendants, and that the defendants were entitled to have that issue passed upon by the jury and the thirteenth request charged, to the end that the claim against them be reduced, not by the amount actually received, but by what should have been obtained by the landlord in the exercise of proper diligence. It was alleged in the complaint that, during the period for which rent was due by defendants under the contract, portions of the building had been rented to other parties "without prejudice to the claims of either of the parties" and that plaintiff had deducted the amounts so received from the amount of the claim against defendants. That allegation was denied by the answer; but the answer contains no allegation that any agreement was made for the reletting of the premises by the landlord for the benefit of the tenant and asserts no right, either to have the reletting construed as such acceptance of the surrender as would wholly discharge the tenants from liability, or as would entitle them to a diminution of the amount of the rent claimed by way of damages for failure of the landlord to exercise due diligence or for want of good faith in performing the agreement. In that state of the pleadings, considered in the light of the evidence adduced, we are of the opinion that prejudicial error may not soundly be imputed to the trial Court for failure to submit an issue as to such breach of an agreement to relet, under the instruction requested in the thirteenth request. See 36 C.J. 342, §§ 1153, 1154. The eleventh exception must therefore be overruled.

The only remaining contention, which is not sufficiently disposed of by the foregoing discussion, is that the trial Judge erred in defining "untenantable" as meaning "not fit to be used for the purpose it is meant to be used, and for which it is rented," and in not charging, as requested, that "untenantable has reference to an injury to the building which substantially affects the enjoyment of it by the tenants." We think the definition of "untenantable" given by the Judge was more favorable to the defendants, from the viewpoint of their contentions of fact in the case, than the definition requested. A building, obviously might not be untenantable merely because it is not suited to a particular use; and, on the other hand, a building might be or become untenantable without reference to any "injury" affecting the tenant's enjoyment of the premises. The meaning to be attributed to the term "untenantable" is obviously to be determined from the connection in which it is used in a contract and in the light of the facts of the particular case, as affected by the general doctrine of the law applicable, and particularly by the principles that there is no implied warranty that premises shall be fit and suitable for the use for which the lessee requires them (16 R.C.L., 772, § 268), and no implied covenant on the part of the landlord to repair. That, under the facts of this case, appellants were not prejudiced by the Court's construction and interpretation of this term, we think, is perfectly apparent.

All the exceptions are overruled, and the judgment of the County Court is affirmed.

MESSRS. JUSTICES WATTS and FRASER concur.

MR. CHIEF JUSTICE GARY and MR. JUSTICE COTHRAN did not participate.