Altman v. Alaska Truss & Manufacturing Co.

MATTHEWS, Justice,

The majority concludes, correctly in my opinion, that the lease was renewed, but that no rent for the renewal period was ever agreed upon and the arbitration remedy set forth in the renewal clause was not utilized. The appropriate relief is therefore to require the parties to submit to arbitration, or for the trial court to establish a reasonable rent for them.¹ However, rather than requiring either of these alternatives, the majority concludes that Altman has waived his right to seek these remedies, or is estopped from seeking them, by accepting rent payments tendered before this law suit was filed. I disagree with this conclusion.

Waiver is conduct indicating a purpose to abandon or relinquish a known right, Milne v. Anderson, 576 P.2d 109, 113 (Alaska 1978). Estoppel generally requires the assertion of a position by word or deed, reasonable reliance thereon by another party, and resulting prejudice. Jamison v. Consolidated Utilities, Inc., 576 P.2d 97, 102 (Alaska 1978). The evidence in this case makes it quite clear that from the outset of the renewal the lessees were told that the rental price tendered was not an acceptable renewal rate.² This point was repeatedly made, and was acknowledged by the lessees through their own efforts to negotiate. Thus, there is no evidence that Altman either intended to waive or abandon his right to contend that the renewal rent should be higher, or through word or action misled the lessees into such a conclusion.³

Ordinarily the acceptance of rent after a lease having a renewal term has expired amounts to consent by the landlord to renewal for a rental amount in the amount of the rent accepted. Fun Products Distributors, Inc. v. Martens, 559 P.2d 1054 (Alaska 1977) is illustrative of this rule. However, this rule does not apply where there is evidence showing an intent not to consent by the landlord who accepts the rent. See Annot. 45 A.L.R.2d 827, 831 (1951). The cases appear to be unanimous that acceptance of rent during the process of negotiation of renewal terms is not consent to renewal on the old terms. Id. § 6, at 841-842. See also Young v. Bridwell, 20 Utah 2d 332, 437 P.2d 686, 689 (1968). Since there can be no doubt in this case that the tenant was at all times aware that the rental rate paid was not a renewal rental rate acceptable to the landlord, and such payments were made during negotiations as to what the rent should be, there is no basis for concluding that Altman either consented to the rate paid as the appropriate renewal rate, or communicated such consent.⁴

For these reasons I would reverse the judgment of the superior court and remand for submission to arbitration or for a determination of the appropriate rent during the renewal period by the superior court. Because appellant correctly declines to suggest that he is entitled both to a determination of fair rental value and an increase in rent under the escalation clause, I intimate no opinion as to the correctness of Part III of the majority opinion concerning the escalation clause.⁵

1 . R. Schoshinski, American Law of Landlord & Tenant § 9.6, at 612 (1980) states:

Where arbitration or appraisal fail either because one party refuses to act or due to circumstances beyond the control of both parties, courts establish a reasonable rent for the renewal period, on the basis that the parties had indicated such intent by employing an arbitration or appraisal provision in their 'lease.

2 . Barker, attorney for ATM, in a letter to Altman of April 25, 1975, summarized what had transpired after renewal of the option to exercise:

The option to renew was exercised by a letter from Alaska Truss & Manufacturing, Inc. to Rail Air Industrial Park dated September 25, 1973. Subsequently, Mr. Tyler attempted to negotiate with Mr. Bocek for the amount of the rental for the extended term, but was never successful in completing these negotiations. (Ex. S)

According to Bocek of Bayside Land, he took the position in the negotiations that at the very least the lease payments would have to be in the area of |800 to $950 per month; that Tyler, of ATM, and Thomason, Tyler’s agent, were told that the original rate was "absolutely unavailable” and "we [Bayside Land] felt certain that should we go to arbitration as called for in the original sublease that arbitrators would certainly, with today’s costs, be up in the area of $1,200 to $1,300 per month on this lease." These negotiations carried on beyond the middle of the summer of 1974. (Exhibit U) In October of 1974 when Altman "walked” the property with Woods shortly after acquiring Bayside Land's interest he requested an increase in rentals, as Woods explained, "in the neighborhood of four times what we were paying.” [Tr. 376] Shortly thereafter, on November 8, 1974, Altman wrote W & R suggesting arbitration of the rental rate: "... is there any reason why we should not now proceed to arbitration in accordance with section 18 requiring each party to appoint one arbitrator and then have the two arbitrators chose a third arbitrator?" (Exhibit M) This suggestion was rebuffed by Woods. Thereafter, as the majority opinion makes abundantly clear, the dispute continued: "Altman ... indicated ... two or three months later, that he wanted W & R to pay more rent.” Op. at 7; "The parties periodically discussed ... whether increased rent should be paid under the sublease.” Op. at 7; "On November 29, 1976 Altman made a written demand ... that ATM and W & R pay additional rent ...” Op. at 8; "during the September 1976 conversation ...” Altman was "‘outraged’ at ATM’s and W & R’s refusal to recognize that he was owed additional (but unspecified) rent. ATM states that during the conversation Altman said that the rental disagreement had to be ‘resolved’ ....” Op. at 16-17; "during the entire course of negotiations regarding whether the rent should be increased for the renewal period ...” Op. at 19; "ATM indicated to Altman that it wished to settle the matter of the renewal rental rate and would be willing to then submit the issue to arbitration” Op. at 23; Altman did not respond in writing to ATM’s request, [to arbitrate] but testified at the trial that he was certain that he telephoned ATM and expressed approval of the idea.” Op. at 23-24; ATM "believed that no agreement was reached on the renewal rate because it was exceedingly difficult to communicate with Altman in a meaningful way.” Op. at 25; "It is apparent that submitting the issue of renewal rental rate to arbitration would result in a higher rent being owed, which explains ATM’s expectation that Altman would begin the process. As Woods of W & R stated, 1 did not push it because I could see, of course, that it would cost me more money.’ ...” Op. at 25; "the parties repeatedly discussed renegotiating the rental rate during the renewal period ...” Op. at 27; "Altman understood 'throughout this whole period of time, '74, ’75, 76 and 77, that the rental controversy was still a subject of conversation and discussion and it was still an open item.’ ” Op. at 28.

3 . One of the remarkable aspects of this case is the fact that there is no disagreement but that the proper renewal rate “was in considerable excess” of the rent actually paid. Op. at 20, n. 8.

4 . Furthermore, the reasoning used by the majority is suspect. If I understand the opinion correctly, it says:

(1) If the arbitration remedy in the renewal clause of a lease is not utilized, the lessee is obligated to pay fair rental value as established by the court.

(2) However, if the lessor has not exhausted his arbitration remedy, the court will remand him to that remedy.

(3) Altman did not exhaust his arbitration remedy because he did not initiate arbitration.

(4) However, Altman should not be remanded to his arbitration remedy because he has waived his right to seek arbitration by continuing to accept the rental payments without protest.

This reasoning process is unusual because if the conclusion expressed in part (4) is correct, the first three premises are unnecessary. This is so because, as explained above, if a lessor accepts rental payments in a renewal context “without protest”, that is without indicating non-consent to renewal at a rate in the amount of rent tendered, renewal is accomplished at that rental rate. If this had occurred the rate of renewal rent would have been established by that fact and there would be no occasion to speak either of the arbitration remedy, or its waiver. However, for the reasons explained above it is clear that this did not take place.

5 . It would seem unconscionable to upwardly adjust the rents upon renewal to reflect a general increase in land prices and rents and then to raise them again because of the increase in rent in the underlying lease which is reflective of the same general price trends.