Opinion
June 4, 1957 —
June 26, 1957.
APPEAL from a judgment of the circuit court for Milwaukee county: WILLIAM I. O'NEILL, Circuit Judge. Affirmed.
For the appellants there was a brief and oral argument by Robert S. McCormack of Milwaukee.
For the respondents there was a brief by Affeldt Lichtsinn, and oral argument by Eldred Dede, all of Milwaukee.
Plaintiffs' complaint alleges that Walter May and Joseph Bieganski are partners and demand specific performance of defendants' alleged contract to give them a five-year lease of defendants' business property. The judgment dismissed the complaint. Defendants' counterclaim demanded restitution of said property which plaintiffs had occupied. The judgment granted restitution. Plaintiffs appeal from the entire judgment.
The trial court determined that plaintiffs had failed to prove a contract to lease which equity might enforce. The sufficiency of the evidence to establish such a contract is the question in issue.
Defendant Rische Construction Company is a family-owned corporation. Its president is defendant Casper F. Rische. He managed the business premises owned by the corporation and had complete authority to negotiate and to execute leases in its behalf. The corporation owned a building in Wauwatosa containing several store units. One unit was occupied by a Mrs. Nichols under a lease from the corporation. She conducted a gift store there. The expiration date of the lease was May 1, 1953. Mrs. Nichols was in poor health and some months before the expiration she told Mr. Rische that she would not continue as tenant and she wished to sell her business. She advertised for a purchaser and plaintiffs Walter A. May, Joseph Bieganski, and interpleaded defendant Rose Bieganski became interested and discussed with Mrs. Nichols the purchase of her stock and the tenancy of her store. Mrs. Bieganski is the sister of May and the mother of Joseph Bieganski. Mrs. Nichols told these people that they would have to arrange their own lease of the premises with Mr. Rische. On March 8, 1953, they met with him and discussed the subject. The length of the lease and the rent scale were agreed upon. Mr. May testified that Rische informed them at this meeting that he would not rent to them unless they reached an agreement with Mrs. Nichols on the price of her stock and paid her that price in full. Joseph Bieganski testified that at this meeting Rische said that before he gave them a lease he would have to check their credit rating. Rische demanded and obtained at that time a deposit of $185, which was the amount of the first month's rent, and in return he gave a receipt reading:
"March 8, 1953 "Received of Walter A. May deposit of $185 for rental of store at 8818 W. North ave. on lease to be signed by Walter A. May, Rose Bieganski, Joseph Bieganski for a period of five years on a basis of $185 per month for the first year, $200 per month for the second year, and third year, and $215 per month for the fourth and fifth year. Surety deposit of four months' rent to be made."The receipt was prepared in duplicate. Mr. Rische retained one signed by Mr. May and May kept one signed by Rische.
On March 24, 1953, Messrs. May and Bieganski met Rische again and there was further discussion of terms. May testified that they were given a definite understanding by Rische that they had to conduct a gift shop in the premises. Bieganski testified that at this meeting they talked about the heating, which the tenants were to pay for, and the permissive use by the tenants of part of the basement; and they understood that they would operate under the same arrangement regarding heating and utilities that Mrs. Nichols had. According to May, at this time there was no discussion of when they were to move in because Mrs. Nichols did not know when she would move out.
May and Bieganski had brought with them $800 to give Rische as security. May testified that they discussed the way in which the money would be kept and Rische agreed to invest it in bonds. They turned the $800 over to him and he signed the following document in duplicate:
"Received of Walter May the sum of $800 as a surety deposit on a lease to be entered into on store property now occupied by Mrs. H. Nichols at 8818 W. North ave. Under no condition is this deposit or the deposit of $185 previously made to be considered an acceptance of the new tenant, or as continuing under the lease of Mrs. H. Nichols until a written lease has been entered into with the owner of that store property."
Rische signed one of the duplicates and gave it to May. May signed the other. Bieganski also signed it, but it is disputed whether he signed it then or later. On the duplicate held by Rische, Bieganski's signature is crossed out, when and by whom is also in dispute.
On April 25, 1953, appellants and Mrs. Nichols reached an agreement on the price of her stock in trade and fixtures and she gave them a bill of sale. The instrument had been prepared in advance and contained the name of Mrs. Bieganski as a purchaser but that name was struck out before delivery. May testified that on or about that date she changed her mind; "Up to that time it was expected that she be in on the deal." May and Joseph Bieganski paid Mrs. Nichols $2,000 on the purchase price in cash and gave her a promissory note for approximately $2,700 for the balance. They moved into the store on May 1, 1953. Rische made no objection and thereafter he accepted rent from them at the rate specified in the memorandum of March 8, 1953, and billed them for heat and insurance charges which they paid. With Rische's consent, at their own expense, they installed trade fixtures modified the electric wiring, and made other alterations in the premises costing $3,450. They testified that from time to time they asked Rische to execute and deliver the expected lease and he always postponed doing so. May says that between May 1st and August 5th, when he asked Rische for a lease Rische said they would get it when they had paid off Mrs. Nichols. Neither then nor later did May contend that the obligation to pay her in full was satisfied until they paid the purchase-money note. On March 15, 1954, Mrs. Nichols sued on their note and then they paid.
Payment of appellants' check for August, 1953, rent was refused by the bank for insufficient funds and Rische gave them a three-day notice to quit or pay rent. The check for April, 1954, rent was similarly dishonored. There was a default in payment of rent for August, 1954, and another three-day notice by Rische. At the end of that month Rische gave them a thirty-day notice terminating their tenancy at the end of September.
The partners, May and Joseph Bieganski, testified that Rische told them in the early days of their occupancy, and even sooner, that he had checked their credit rating and found it good. Rische denied this, testifying that he did not make an immediate check because they were to give him references to parties with whom they had dealt but they never did so, and he soon found that they were in financial difficulties. Such difficulties were confirmed by the witness, Mrs. Dreyer, who managed the gift store for the partners from November, 1953, to January, 1955, as well as by the dishonored rent checks.
Rische testified that he did not object to the appellants moving into the store but soon after they had done so he informed them their credit was not satisfactory, that he would not give them a lease and that they were occupying on a month-to-month basis. They denied that he did so.
Although the briefs discuss at length the requirements of the statute of frauds and the conditions, such as partial performance, under which equity may decree specific performance of agreements whose form does not satisfy that statute, the facts here seem to us to determine this dispute before questions involving the statute are reached. The memoranda-receipts of March 8th and March 24th did not and were not considered by the parties to express their entire agreement. This is shown by the testimony of the partners themselves on such subjects as the business to be conducted in the store, and the payment for heat, utilities, and insurance in addition to rent, and the precedent conditions of partners' credit satisfactory to Mr. Rische and their payment in full for the property of Mrs. Nichols. None of them appear in the memoranda although appellants testified they were orally agreed upon. There is the further fact that Mrs. Bieganski was to be a lessee and was so named in the March 8th memorandum and it was not until on or about April 25th that even Mr. May found out that she had withdrawn from the deal. The record does not show when, if ever, this information was communicated to Mr. Rische or that after knowledge of the fact he agreed to proceed without her. (The trial court's memorandum decision states that Rische was told of this on March 24th. We have searched the record without finding support for the statement in the evidence, and in view of the fact that May did not learn of it until about April 25th, we must conclude that the court's memory of the testimony was not accurate in this respect.)
So when on May 1, 1953, appellants moved into the store and began paying rent they had no written lease, as provided by the memorandum of March 24th, they had not satisfied Rische concerning their credit, nor had they paid Mrs. Nichols in full as they, themselves, understood payment to her was required before an obligation arose on the part of Rische to give them a lease. Their payment at that time of rent and other incidentals cannot possibly be considered as performance of the terms of a lease for which they had not yet qualified, nor can their expenditures for stock, fixtures, or alterations. Their tenancy must in its inception be held as one from month to month, and there is no evidence of any subsequent agreement modifying it so as to convert it into a tenancy for years. The trial court so held expressly in its conclusions of law, in which we concur. The month-to-month tenancy could be, and was terminated by Rische's notice to the partners, effective September 30, 1954.
Under the circumstances we conclude that appellants have failed to establish the existence of a written or oral contract entitling them to a tenancy for years whose specific performance may be enforced by a court of equity.
By the Court. — Judgment affirmed.