Opinion
No. 76-019
Decided April 21, 1977. Rehearing denied May 19, 1977. Certiorari granted July 25, 1977.
After landlord terminated lease option under terms allowing such termination if restaurant leased was to be "demolished," tenant brought action alleging that demolition had not occurred. Trial court found for tenant, and landlord appealed.
Affirmed
1. LANDLORD AND TENANT — Wrongful Termination of Lease — Dependent — Building "Demolished" — Walls Left Standing — Trial Court Correct — Lease Wrongfully Terminated. Where the issue of whether lessor had wrongfully terminated lease depended upon whether restaurant on leased property had been "demolished," and where the roof, ceiling, fenestration, internal partitions, and rear wall of the building housing the restaurant had been removed, but all the remaining walls of the building were substantially left standing, the trial court correctly determined that the restaurant had not been demolished and that therefore the lessor had wrongfully terminated the lease.
2. DAMAGES — Business Lessee — Loss of Future Profits — Speculative — No Recovery — Exception — Established Pattern of Profits. A business lessee may not recover loss of future profits where such profits are speculative, but an exception to this rule exists which permits a business which has established a pattern of profits to recover future profits.
3. Breach of Lease — Restaurant — Operated For Two Years — Record of Past Profits — Average Monthly Profit — Awarded — No Error. In action relative to wrongful termination of lease, where lessee's restaurant had operated for nearly two years and the records it kept established with reasonable certainty a record of past profits from which future profits could be determined, and the court used the average net monthly income of the restaurant during its period of operation to arrive at its award of damages for the remaining months of the lease, there was no error in the award of damages so made.
4. Restaurant — Subchapter "S" Corporation — Earnings — Distribution of Dividends — Business Profits — Proper Basis — Damage Award — Future Lost Profits. Where restaurant was operated as a subchapter "S" corporation, its "earnings" could be characterized as a distribution of dividends or corporate profits, and as such they represented business profits which could serve as a basis for a damage award for future lost profits.
Appeal from the District Court of Boulder County, Honorable William D. Neighbors, Judge.
Clarke Waggener, P.C., Anthony F. Renzo, for plaintiffs-appellees.
French Riddle, Joseph C. French, Robert W. Stone, for defendant-appellant.
Defendant Kyle Lorenzen appeals a judgment concluding that he had breached the terms of his lease and awarding damages to his tenants Terry Goodhart and Harvey Lindenberg, operating as Mustard's Last Stand, Inc. We affirm.
The tenants leased a building for use as a restaurant from Lorenzen for a two-year term at a rent of $200 per month. The lease contained an option to renew for an additional two years. This option could be terminated if the lessor elected to "tear down the leased premises and provided that the demolition of said leased premises shall occur within 90 days after the expiration of the lease term." Relying on this provision, the lessor terminated the option, and proceeded to remove the roof, ceiling, fenestration, internal partitions and the rear wall of the building. Left standing were substantially all of the three remaining walls of the building. Using this shell, the lessor constructed a somewhat larger restaurant architecturally integrated with an adjacent office building, which restaurant was leased to others at $400 per month.
The tenants sued, alleging that the lease provision had been violated since the building had not been "demolished." They sought damages for lost profits and expense of storing equipment.
Prior to trial the parties stipulated that the lease was an unambiguous, integrated document and that no parol evidence would be presented to aid interpretation. Consequently, the sole issue at trial was whether the lessor demolished and tore down the restaurant within the meaning of the lease.
[1] The trial court concluded that the word "demolish" should be interpreted according to its standard dictionary meaning, "to throw or pull down; to raze; to destroy the fabric of; to pull to pieces, hence to ruin; destroy." Merriam-Webster, New International Dictionary 696 (2d ed.) Applying this definition to the word to the undisputed facts before it, the trial court concluded that the restaurant had not been demolished and therefore the lessor had breached the lease provision. Subsequently, after hearing evidence of damages, the court awarded the tenants damages of $21,822 for lost profits and expenses.
We agree with the trial court's construction of the words "demolish" and "tear down." Generally, words used in a contract should be accorded their plain and accepted meaning. Hammond v. Caton, 121 Colo. 7, 212 P.2d 845 (1949), and the dictionary definition of a word would certainly constitute such meaning. See Horton-Cavey Realty Co. v. Spencer, 37 Colo. App. 143, 544 P.2d 998 (1975). In determining the proper definition of the word "demolish," courts in other jurisdictions have used the dictionary definition. Garliner v. Glicken, 23 Misc. 2d 170, 196 N.Y.S. 2d 784 (1960); Lockwood v. Goldman, 345 Ill. App. 324, 102 N.E.2d 828 (1952). See also Star Mfg. Co. v. Quarrles, 172 Okla. 550, 46 P.2d 497 (1935).
The lessor cites three New York cases in support of his conclusion that the building was "demolished." Friedman v. Ontario Holding Corp., 279 App. Div. 23, 107 N.Y.S.2d 610, aff'd 304 N.Y. 625, 107 N.E.2d 97 (1951); Application of Gioeli, 221 N.Y.S.2d 568 (1961); and Noyes v. Rothfeld, 78 N.Y.S.2d 433 (1947). However, these cases are neither controlling in Colorado nor persuasive. In each of them, the New York court was guided by the legislative intent of a number of New York rent statutes in arriving at its result. Indeed, in Noyes v. Rothfeld, supra, the court stated:
"The Court must accord that interpretation to the statute which best gives effect to the intention of the Legislature when it enacted such statute, and since the results to be obtained by the structure to be erected are those desired by the Legislature, this court necessarily concludes that the landlord had complied insofar as the erection of a new building is concerned."
Also in Friedman v. Ontario Holding Corp., supra, after acknowledging that the work done on the buildings in question was an "alteration rather than [a] demolition," (emphasis added) the court nonetheless found that the building was demolished and stated:
"The Emergency Rent Laws were passed due to the limited quantity of rental space available in New York City in proportion to the demand, and were designed to encourage new construction in order to relieve the shortage."
Consequently, the rationale applied in the New York cases in arriving at a definition of demolish is inapplicable to the instant case and for us to follow their reasoning would be unwarranted.
The lessor next contends that there was no reasonable certainty as to the restaurant's future profits and thus the damage award was improper. Specifically he asserts that Mustard's Last Stand did not operate long enough to establish a reliable record of profits and therefore any damage award for future profits would be speculative. We disagree.
[2,3] Generally, a business lessee may not recover loss of future profits where such profits are speculative, but an exception to this rule exists which permits a business which has established a pattern of profits to recover future profits. Annot., 88 A.L.R. 2d 1024. Here, Mustard's Last Stand operated for nearly two years and the records it kept, as found by the trial court, established with reasonable certainty a record of past profits from which future profits could be determined. Indeed, the court found, and the record so supports, that the average net monthly income of the business for its 22-1/2 months of operation was $903. In arriving at its award of damages the court multiplied this monthly figure by 24 — the number of months the option would have permitted continued operation. From this total the court deducted the earnings of the tenants for the period the lease would have been in effect. We find no error in this regard.
The lessor also argues that the tenants failed to mitigate their damages. However, the trial court found upon competent evidence that this was not the case, and therefore we affirm its conclusion.
The lessor further asserts that, in effect, the court awarded the tenants their lost earnings from the business rather than the lost profits of the business. In this connection, it is also argued that damages may not be awarded for lost earnings of employees of the business. Again, we disagree.
[4] Mustard's Last Stand was operated as a subchapter "S" corporation. Int. Rev. Code §§ 1371-1377. Consequently what the lessor characterizes as earnings could likewise be characterized as a distribution of dividends or corporate profits. The fact that these payments were made periodically, rather than retained by the business for a single distribution to the stockholders, does not alter the fact that they represented business profits which could serve as the basis of a damage award for future lost profits.
The other contentions of error regarding the damage award have been considered and are without merit.
Judgment affirmed.
JUDGE RULAND concurs.
JUDGE BERMAN dissents.