Pelikan v. Spheeris

Action commenced the 7th day of July, 1947, by Edward J. Pelikan, plaintiff and appellant, against Michael Spheeris and John Spheeris, and Spheeris Realty Corporation, defendants and respondents, for specific performance of the terms of a lease of premises located in the city of Milwaukee. From a judgment dismissing plaintiff's complaint, plaintiff appeals.

Appellant was engaged in the restaurant or restaurant and tavern business in the premises known as 746 North Sixth street in the city of Milwaukee from 1931 until May, 1944. In May, 1944, his tavern license was revoked, at which time he subleased the premises to another party who continued to operate the restaurant and tavern. Respondents Michael Spheeris and John Spheeris purchased the property in June, 1944, and on June 30, 1944, leased it to appellant for a period of three years from July 1, 1944. It was provided in the lease that

". . . said premises are to be used and occupied as and for a tavern and for no other purpose whatsoever."

Another provision of the lease was:

"It is agreed between the lessors and the lessee that the lessee will submit in writing to the lessors that he wishes to exercise his option to renew the lease on the property herein described for another period of three years time, and after the notice has been received by registered mail, the lessors will agree with the lessee as to the amount of the rent, but it is agreed at this time that the rent shall not exceed the sum of two hundred ($200) dollars per month if the option is exercised for the renewal of the lease by said parties."

Plaintiff had invested approximately $8,000 in fixtures used in the premises and leased the fixtures and subleased the building to a tenant with a license beginning July 1, 1944. During the license years 1945-46 and 1946-47 appellant leased the fixtures and subleased the premises to one James A. Russell. After entering into the lease, Michael Spheeris and John Spheeris conveyed the property to Spheeris Realty Corporation which had been organized, and assigned the lease to it. The sublease to Russell was approved by the officers of the corporation.

April 9, 1947, pursuant to the terms of the lease, appellant served notice by registered mail of his election to renew the lease for the additional period of three years from July 1, 1947, and on June 2, 1947, respondent Realty Corporation served notice terminating the tenancy of this appellant as of June 30, 1947, claiming appellant had breached the provisions of the lease during the term thereof. In the meantime, both appellant and James A. Russell, sublessee, made application to the city council of the city of Milwaukee for a tavern license for the premises in question. The officers of the corporation owning the building informed appellant and Russell that the person receiving the tavern license would be given a lease, but before a license was granted to either party respondent property owner entered into a written lease of the premises with James A. Russell, beginning July 1, 1947, on the same terms and conditions as appellant's renewal lease would have provided. A tavern license was finally granted by the city council of the city of Milwaukee to James A. Russell on June 30, 1947, and the application for license by appellant was denied. Appellant exercised his option to renew his lease for a period of three years in the manner provided in the lease and the language of the option was clear and unambiguous. It was held in Kollock v. Scribner (1897), 98 Wis. 104,73 N.W. 776, that where the language of an option is clear and unambiguous the court will enforce lessee's rights, even though it be a mere general promise to renew with no reference to the terms of the new lease. Respondent Spheeris Realty Corporation, on June 2, 1947, served notice on appellant that his lease would terminate as of the 30th day of June, 1947, and possession of the premises would be demanded at that time. This notice contained the further statement: "Having breached the provisions of the lease during the term thereof, no right to exercise an option on your part exists." No specific breach is set forth as of or prior to the date of the notice, nor is it now claimed there was any breach of any provision of the lease at that time. It was a notice to appellant by the landlord that it refused to recognize the exercise of appellant's option to renew the lease. Shortly thereafter, on June 10, 1947, respondent Realty Corporation entered into a written lease of the premises with Russell. Prior thereto Russell had refused to sublease from appellant and made overtures to respondent Realty Corporation to lease direct from it. This left appellant with a large investment in fixtures which were in the building, an election of his option to renew the lease on the premises which had been exercised by him, and a notice from the owner of the building that it refused to recognize the exercise of his option because he had breached the provisions of his lease, together with a written lease from the property owner to appellant's sublessee Russell effective July 1, 1947.

The trial court in its memorandum opinion seems to place great stress upon the fact that appellant was unable to conform with the provisions in the lease which provided that the premises were to be used for tavern purposes only. Importance is also attached to the fact that appellant was unable to obtain a tavern license and that his subtenant refused to continue to occupy the premises as sublessee. At no time during the lease did appellant have a tavern license or occupy the premises personally under the terms of the lease, but he did company with the provisions of the lease. Respondent Realty Corporation made it impossible for him to comply after July 1, 1947, by refusing to recognize his option and by leasing the premises to another tenant during the early part of June, 1947. Certainly no sublessee would become interested in the premises when it was evident by the conduct of the owner that he could not obtain possession without litigation. Appellant was placed in a position where he was comparatively helpless by the acts of respondent Realty Corporation. Forfeitures of leaseholds for condition broken and restrictions upon the right to sublet are both looked upon with disfavor and a construction of a contract which leads to either of these results will be avoided, if reasonably possible. Newfield Bldg. Co. v.Mohican Co. 105 Conn. 488, 136 A. 78. 80, citing Camp v.Scott, 47 Conn. 366; Chamberlain v. Brown, 141 Iowa, 540,120 N.W. 334; In re Prudential Lithograph Co. (2d Cir.) 270 Fed. 469; White v. Huber Drug Co. 190 Mich. 212,157 N.W. 60; Maddox v. Wescott, 156 Ala. 492, 47 So. 170; 1 Wood, Landlord and Tenant (2d ed.), p. 714, sec. 321.

The trial court held this case is one in which the court should in the exercise of its discretion deny the remedy of specific performance, relying on Droppers v. Hand (1932), 203 Wis. 681,242 N.W. 483, and cases there cited. We do not understand that case so held. Quoting from 3 Williston, Contracts, p. 2542, sec. 1425, it was said:

". . . that wherever a contract though legally valid is grossly unfair, or its enforcement opposed to good policy for any reason, equity will refuse to enforce it."

Respondents argue that having a licensed tavern in this building is of great value to the premises and that under the facts established respondent Realty Corporation would suffer irreparable loss if appellant was unable to comply with the terms of the lease. Any tavern license can be revoked at any time for cause. This is a hazard of this type of lease. Appellant had complied with the terms of the lease for a period of three years and it is reasonable to say he could have continued to comply if respondent Realty Corporation by its acts had not made it impossible for him to do so. Respondents were in no position to terminate the contract prior to July 1, 1947, and appellant's right to exercise the option to renew the contract for an additional period of three years was a provision thereof with the same force and effect as all other provisions. The contract was legal and there is nothing grossly unfair about it nor is its enforcement opposed to good public policy for any reason. We conclude it should be enforced.

By the Court. — Judgment reversed, and cause remanded with directions to enter judgment in accordance with this opinion.