Opinion
November 28, 1966 —
January 3, 1967.
APPEAL from an order of the circuit court for Marathon county: GERALD J. BOILEAU, Circuit Judge. Reversed.
For the appellants there was a brief and oral argument by David D. Brown of Green Bay.
For the respondents there was a brief by Peickert, Anderson, Fisher, Shannon O'Brien of Stevens Point, for Prudential Theatres Company of Wisconsin, Inc., and by Weber Bolte of Wausau, for Frank Bluhm, and oral argument by John E. Shannon, Jr., and Richard J. Weber.
This appeal arises out of an action initiated by Gladys M. Cranston and Lee H. Cranston, her husband, for damages sustained as the result of an alleged civil conspiracy between the defendants, Frank Bluhm and Prudential Theatres Company of Wisconsin, Inc. (hereinafter "Prudential").
Defendants demurred to the original complaint on the ground that it failed to state facts sufficient to constitute a cause of action. The circuit court sustained the demurrer. The complaint was then amended, defendants demurred on the same ground, and again the demurrer was sustained. Plaintiffs then served and filed a further complaint denominated "Second Amended Complaint." The facts herein set forth are taken from the latter amended complaint.
Plaintiffs own the Lyric Theatre in Stevens Point in joint tenancy. On August 15, 1961, plaintiffs leased the theatre under written lease to defendant Bluhm for a four-year term commencing September 1, 1961. The lease provided: The premises were to be used as a theatre and for no other purpose; the lease was not to be assigned, nor could the premises be sublet without written consent of the plaintiffs; Bluhm was to pay a minimum rent of $150 per month for the first two years and $200 per month for the last two years of the lease term plus 10 percent of the net profits; if Bluhm defaulted in performance of the covenants and conditions of the lease and such default continued for a period of thirty days after plaintiffs gave written notice thereof, or if Bluhm failed to keep the theatre open for business for a period of six months in any lease year, plaintiffs, at their option had the right to terminate the lease by giving written notice of termination.
Defendant Prudential operated the only other theatre in Stevens Point — the Fox Theatre. Prudential also through stock ownership, interlocking directorships, or through agreements or other means "was able to control the decisions and business moves of Orpheum Theatres, Inc. (hereinafter `Orpheum') to further, and accomplish, the best interests of Prudential and did so control them in reference to all matters pertaining to the Lyric Theatre" during the times material to this action.
On November 2, 1961, Bluhm entered into a so-called "operating agreement" with Orpheum. The pertinent provisions of the agreement will be set forth in the opinion. The second amended complaint characterizes the operating agreement as either an assignment of the lease of the Lyric Theatre or a subletting of the leased premises. On June 6, 1962, Orpheum assigned the operating agreement to Prudential. At the same time Orpheum also transferred to Prudential its interest to any furniture, furnishings, fixtures, and equipment in the Lyric Theatre and to the name "Lyric Theatre."
The Lyric Theatre was closed for a period starting about May 1, 1962, and ending about October 2, 1963. On August 15, 1963, plaintiffs served on Bluhm written notice of termination of the lease stating several grounds for such action including the closing of the theatre for more than six months in one lease year. The notice stated further that plaintiffs would reenter the premises on September 1, 1963. On August 28, 1963, plaintiffs by letter to Bluhm extended the time for delivery of possession to September 3, 1963.
On September 4, 1963, plaintiffs peaceably took possession of the theatre and changed the locks on the same. After taking possession plaintiffs delivered the same together with the keys to the new locks to Elmer V. Krueger, their new tenant. Thereafter, and prior to September 9, 1963, defendants through their agent, the manager of the Fox Theatre again took physical possession of the Lyric Theatre and changed the locks thereon thereby depriving plaintiffs and their new tenant of the possession and use of the theatre.
The acts of (1) closing the theatre for the period beginning about May 1, 1962; (2) entering into the operating agreement without plaintiffs' consent and the assignment of the same to Prudential; and (3) retaking of possession by defendants after plaintiffs had reentered and changed the locks and placed the new tenant in possession, were alleged to be "part of one whole continuing conspiracy" in which the defendants "and others whose acts in reference hereto were controlled by Prudential `united.'" The object of the alleged conspiracy was to stifle and cut off competition by the Lyric Theatre with the Fox Theatre in Stevens Point.
The second amended complaint seeks recovery of punitive as well as actual damages.
Defendants demurred to the second amended complaint on the ground that it also failed to state facts sufficient to constitute a cause of action. By order entered May 16, 1966, the circuit court sustained the demurrer and denied plaintiffs the right to plead over. Plaintiffs have appealed.
This court has defined a conspiracy as "a combination of two or more persons by some concerted action to accomplish some unlawful purpose or to accomplish by unlawful means some purpose not in itself unlawful."
Mendelson v. Blatz Brewing Co. (1960), 9 Wis.2d 487, 490, 101 N.W.2d 805. Substantially the same definition is set forth in Wachowski v. Lutz (1924), 184 Wis. 584, 593, 201 N.W. 234; White v. White (1907), 132 Wis. 121, 129, 130, 111 N.W. 1116; and Martens v. Reilly (1901), 109 Wis. 464, 473, 84 N.W. 840. See also 16 Am. Jur.2d, Conspiracy, p. 149, sec. 43.
The gist of the alleged conspiracy is that Bluhm and Prudential conspired to close the Lyric Theatre and thus eliminate the only theatre in Stevens Point which competed for patronage with Prudential's Fox Theatre. The purpose of the alleged conspiracy is not in itself unlawful so the test of whether the instant complaint states a good cause of action is dependent on whether it alleges any unlawful acts on the part of the defendants which were performed pursuant to the conspiracy. The word "unlawful" as thus used need not be a criminal act since any wilful, actionable violation of a civil right is sufficient. For example, a conspiracy to cause a breach of contract is actionable)
Martens v. Reilly, supra, footnote 1, page 473.
Mendelson v. Blatz Brewing Co., supra, footnote 1, page 490, and cases there cited.
Plaintiffs contend that the complaint alleges three unlawful acts which were performed pursuant to the conspiracy:
(1) The closing of the Lyric Theatre for a period in excess of six months in a lease year.
(2) The execution of the "Lyric Theatre Operating Agreement" between Bluhm and Orpheum, which was subsequently assigned by Orpheum to Prudential.
(3) The retaking of possession of the Lyric Theatre after plaintiffs had given notice of termination of the lease and had leased the theatre and delivered possession thereof to a new tenant.
It is not necessary that plaintiffs succeed in establishing that all three of the above acts were unlawful. The unlawfulness of any render the complaint good against demurrer.
Closing of Theatre for a Period in Excess of Six Months.
Plaintiffs concede that the lease entered into between Bluhm and themselves contains no express prohibition against closing the Lyric Theatre for more than six months but contend that such a prohibition exists by implication. The trial court held that such a prohibition is not to be implied. We agree.
The only language in the lease which refers to closing of the theatre for more than six months in any lease year is found in the default clause. We do not, however, deem the wording of that clause to prohibit a closing of the theatre for more than six months in any lease year. The first sentence of the default clause reads:
"Lessee agrees that if default shall at any time be made by him in the payment of the rental to be paid hereunder when due, or if default shall be made in any of the other terms, conditions, or covenants to be by Lessee kept, observed, and performed, and such default, or defaults, shall continue for a period of Thirty (30) Days after written notice thereof shall have been given by Lessors to Lessee, or if Lessee fails to operate the theatre (keep the theatre open for business) for a period of Six (6) Months in any lease year, then Lessors may, at their option, at any time thereafter and prior to the curing of such default, declare the term of this lease ended and terminated by giving Lessee written notice of such termination."
It seems abundantly clear from this wording that, while plaintiffs were afforded the right to terminate the lease in the event the theatre was not operated for at least six months in any lease year, such closing was not a breach of any affirmative covenant of the lease.
Inasmuch as there is no affirmative requirement in the lease that the theatre be operated at least six months in any lease year, the closing of the theatre by the defendants for the period beginning about May 1, 1962, was not an unlawful act upon which plaintiffs can predicate their action for damages grounded on conspiracy.
Execution of the Operating Agreement.
If execution of the operating agreement of November 2, 1961, between Bluhm and Orpheum constituted an assignment or sublease, it would be unlawful because of the express prohibition contained in the lease against assignment or subleasing without plaintiffs' consent.
The essential provisions of the operating agreement were: The duration of the agreement was for the entire remainder of the lease term. Orpheum was given the exclusive right to operate the theatre, to procure and book motion picture films and attractions to be exhibited, and determine theatre policy. Orpheum was to hire, supervise, fix the compensation of, and discharge all employees. Bluhm was to be reimbursed by Orpheum for the expenses he had incurred in renovating the theatre and was to receive $3,500 per year fixed rental, except that the rental for the first lease year was to be $3,416.66. Reimbursement and payments of rent were to be made out of the gross receipts. In addition Bluhm was to receive 10 percent of the operating profits. The remaining 90 percent were to be retained by Orpheum. Title to any personal property, fixtures, improvements and equipment was to vest in Bluhm upon termination of the agreement. The only control retained by Bluhm was that no expenditures in excess of $200 for improvements, alterations or additions were to be made by Orpheum unless first approved by him in writing.
Thompson on Real Property distinguishes assignments and subleases as follows:
"An assignment of a lease may be said to be a transaction by which the lessee transfers his entire-interest in the demised premises or a part thereof for the unexpired term of the original lease. So the basic distinction between an assignment and a sublease is that by the former the lessee conveys his whole interest in the unexpired term leaving no reversion in himself, while the latter transfers a part only of the leased premises for a period less than the original term."
3A Thompson, Real Property, pp. 50-52, sec. 1210. See also 1 American Law of Property, pp. 297, 298, sec. 3.57; 32 Am. Jur., Landlord and Tenant, p. 290, sec. 314; 2 Cases on Property (Walsh and Niles, 2d ed.), p. 470; Wallace, Assignment and Sublease, 8 Indiana Law Review (1933), 359.
Because the operating agreement was to extend for the entire balance of the lease term and the entire premises were included, it was not a sublease. It does, however, have all the characteristics of an assignment. To quote from Thompson further:
"Any language which shows the intention of the parties to transfer the property from one to the other is sufficient, the form of the instrument being immaterial. If it has the legal effect to pass to another the lessee's interest in the whole or in any part of the demised premises for his entire term, or the remainder of his term, it is an assignment." (Emphasis supplied.)
3A Thompson, Real Property, p. 53, sec. 1210.
We deem the provision which required Orpheum to obtain Bluhm's written consent to an expenditure in excess of $200 for improvements, alterations or additions insufficient to prevent the operating agreement from constituting an assignment of the lease within the meaning of the provision of the lease which prohibited an assignment without plaintiffs' consent. Neither do we think it material how Orpheum was to remunerate Bluhm for what Orpheum obtained from him under the agreement. Defendants rely principally on Waterville v. Kelleher where an agreement to operate an opera house was held to be neither an assignment nor a sublease, but merely an agreement which conferred a privilege or license to operate the opera house. However, in that case the lessee (corresponding to Bluhm) retained greater incidents of control, i.e., he retained the right to let the opera house to local parties and the right to terminate the contract on thirty days' notice.
(1928), 127 Me. 32, 141 A. 70.
We conclude that the execution of the operating agreement was a breach of the lease which, as we have stated, prohibited an assignment without plaintiffs' consent. The assignment was therefore an unlawful act.
While Orpheum is not a defendant in this action the complaint alleges that it was under the control of Prudential and that the execution of the operating agreement was part of a continuing conspiracy in which those under Prudential's control, meaning Orpheum, united. According these allegations the liberal construction we must when attacked by demurrer, we hold that they are sufficient to charge that Orpheum entered into the operating agreement with Bluhm while under Prudential's control as part of the conspiracy. When so construed the complaint states a cause of action for damages sustained as a result of conspiracy.
The Retaking of Possession of Theatre by Defendants.
Defendants do not dispute the fact that on the basis of the allegations of the complaint they were guilty of an unlawful act in retaking possession of the Lyric Theatre after plaintiffs had entered and delivered possession to their new tenant, Elmer Krueger. Rather they contend that an action to recover damages based on such conduct is in reality an action for trespass, and that plaintiffs cannot maintain such an action where their tenant was in possession and it was the tenant, not plaintiffs, who was dispossessed.
Defendants are correct in their contention that a landlord cannot maintain an action for trespass against one who dispossesses his tenant. However, we deem this to be entirely beside the point insofar as the posture of the instant complaint is concerned. The complaint makes it clear that the damages sought to be recovered are for the closing of the Lyric Theatre pursuant to the conspiracy to benefit the operation of Prudential's Fox Theatre, and that defendants' wrongful repossession of the Lyric Theatre prolonged such closing. It is the damages which are the gist of a cause of action grounded on conspiracy.
Gunsolus v. Lormer (1882), 54 Wis. 630, 634, 12 N.W. 62; Prosser, Torts (3d ed.), p. 69, sec. 13; 52 Am. Jur., Trespass, p. 854, sec. 25.
Singer v. Singer (1944), 245 Wis. 191, 195, 14 N.W.2d 43.
Thus defendants' unlawful acts of dispossessing the tenant Krueger and thereafter keeping the Lyric Theatre closed provide an additional basis for holding that the complaint states a cause of action.
By the Court. — Order reversed, and cause remanded for further proceedings consistent with this opinion.