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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Carr-Gottstein Foods Co. v. Wasilla, LLC (05/16/2008) sp-6265
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| CARR-GOTTSTEIN FOODS CO. | ) |
| and SAFEWAY, INC., | ) Supreme Court No. S- 12010 |
| ) | |
| Appellants, | ) Superior Court No. 3AN-02- 7336 CI |
| ) | |
| v. | ) O P I N I O N |
| ) | |
| WASILLA, LLC, d/b/a WASILLA | ) No. 6265 May 16, 2008 |
| SHOPPING CENTER, LLC, | ) |
| ) | |
| Appellee. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Morgan Christen, Judge.
Appearances: James N. Reeves and Michael A.
Grisham, Dorsey & Whitney LLP, Anchorage, for
Appellants. Jeffrey M. Feldman and Susan
Orlansky, Feldman Orlansky & Sanders,
Anchorage, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Carpeneti, Justices. [Bryner,
Justice, not participating.]
MATTHEWS, Justice.
I. INTRODUCTION
Approximately six years after a supermarket relocated a
stand-alone liquor store to the supermarkets premises, the
supermarkets landlord claimed that the move constituted a breach
of the supermarkets lease. The superior court agreed. We
reverse because the landlords lengthy silence and other acts
constituted a waiver of its right to insist on strict performance
of the lease with respect to the relocation.
II. FACTS
In the 1950s Larry Carr opened his first Carrs grocery
store and Oaken Keg liquor store. He expanded the businesses and
in the 1970s merged them with Barney Gottsteins wholesale
company. Thereafter several Carr-Gottstein companies were
created, including Carr-Gottstein Properties (CG Properties), a
real estate development company, and LABAR Co., a partnership.
At all times relevant to this case CG Properties managed the
commercial real estate owned by Carr-Gottstein entities,
including LABAR.
One of the properties LABAR owned was the Wasilla
Shopping Center. A Carrs supermarket and an Oaken Keg liquor
store were two of the tenants in the Wasilla Shopping Center, and
a Carr-Gottstein company owned them, too. The supermarket was in
the main building of the shopping center while the liquor store
was in a smaller, satellite building. In 1990 an investment
group headed by Leonard Green bought the Carrs supermarkets and
Oaken Keg liquor stores, but not the real estate on which they
were located. LABAR remained the landlord of the Wasilla
Shopping Center. The Green-controlled corporation that owned
Carrs supermarkets after 1990 was eventually named Carr-Gottstein
Foods Co. (CG Foods). The Oaken Keg stores were owned by Oaken
Keg Spirit Shops, Inc., a wholly owned subsidiary of CG Foods.
As part of the sale, the supermarket lease for the
Wasilla Shopping Center was renegotiated. Its term was twenty
years subject to four successive renewal options of five years
each at the option of the tenant. The liquor store lease of the
satellite building was to expire in 1995. The use clause of the
supermarket lease provided that the tenant would use the premises
for the principal purpose of conducting thereon a general food
supermarket. It permitted the sale of items sold in other
general food supermarkets. Another clause of the supermarket
lease prohibited the tenant from subleasing the premises without
landlord consent.
Because Alaska law had disallowed grocery stores from
selling liquor, Oaken Keg stores, including the one in the
Wasilla Shopping Center, were physically separate from Carrs
stores. In 1993 the Alcohol Beverage Control Board modified its
interpretation of state liquor laws to permit closer physical
proximity between retail establishments and liquor stores. In
1996, after the liquor store lease expired, CG Foods moved the
liquor store in the Wasilla Shopping Center into part of the
premises previously occupied by the supermarket. This relocation
required physical alterations to the supermarket premises,
including glass partitions and doors separating the liquor store
from the supermarket. Electrical modifications were also made.
CG Foods did not seek or obtain permission for the relocation
from CG Properties. But CG Properties was aware of the
relocation and made no objection that the relocation would
violate either the use clause or the sublease clause. Denali
Commercial Management, Inc., described as CG Properties
management arm with respect to the shopping center, facilitated
the relocation by bidding on and billing for some of the
electrical work required by the move Denali billed CG Foods some
$20,000 for electrical work.1 After the relocation CG Properties
required Oaken Kegs sales figures to be reported separately, but
combined them with the supermarkets sales figures for the purpose
of calculating whether percentage rent should be charged.2
In 1998 LABAR transferred ownership of the Wasilla
Shopping Center to another Carr-Gottstein entity, Wasilla LLC.
Wasilla LLC was also managed by CG Properties and in this opinion
our reference to CG Properties should be understood to include
both LABAR and Wasilla LLC.
In 1998 Wasilla LLC borrowed a large amount of money
from a third party, using the Wasilla Shopping Center as
security. In connection with this transaction, Robert Mintz, CG
Properties general manager, signed a sworn statement that the
leases in the shopping center were not in default.
In 1999 Greens investment group sold CG Foods to
Safeway. As part of this transaction, Safeway asked about
possible liabilities that CG Foods might have and sought estoppel
certificates from CG Properties that would declare that there
were no defaults under CG Foods leases except as stated.3 CG
Properties did not state that CG Foods was in default under the
lease, but refused to sign the certificates. In February 2002,
approximately six years after the relocation of the liquor store,
CG Properties wrote Safeway that it considered the move to be a
breach of the supermarket lease.
III. PROCEEDINGS
A few months later CG Properties, acting through
Wasilla LLC, brought this action against Safeway, CG Foods, and
Oaken Keg Spirit Shops, Inc. (collectively Safeway). The
complaint alleged that several years ago the liquor store had
been relocated to a partitioned area of the supermarket without
CG Properties consent and that this violated the leases use and
sublease clauses. CG Properties sought declaratory relief and a
permanent injunction preventing Safeway from operating an Oaken
Keg liquor store on the supermarket premises.
Safeway answered and pled affirmative defenses
including waiver, estoppel, and laches. CG Properties then filed
an amended complaint, adding a claim for damages. Extensive
motion practice and discovery followed.
CG Properties moved for partial summary judgment
seeking a ruling that CG Foods had violated the use and sublease
clauses. According to CG Properties, the use clause was
understood by the parties to exclude the sale of liquor.
Further, CG Properties argued that the sublease clause of the
lease, which prohibited CG Foods from allowing others to use any
part of the leased space without the landlords written consent,
included wholly owned subsidiaries of CG Foods.
Safeway opposed the motion for summary judgment and
cross-moved for summary relief. It argued that the use clause
permitted the sale of liquor from within the supermarket
premises. Safeway also argued that the sublease to Oaken Keg was
not a breach of the lease because Oaken Keg was a wholly owned
subsidiary of CG Foods and the parties treated the two
corporations as a single entity. Both as to the use clause and
the sublease clause, Safeway argued further that the parties
course of performance supported Safeways interpretation of the
lease. In addition, Safeway argued that CG Properties had waived
its right to contend that Safeway was in breach of the use and
sublease clauses because of CG Properties long acquiescence in
the move and its conduct and statements relating to the absence
of defaults. On similar grounds, Safeway presented an argument
relating to estoppel and laches.
Anchorage Superior Court Judge Morgan Christen granted
CG Properties motion for summary judgment concerning the sublease
clause, holding that CG Foods breached its duty to seek
permission before sub-leasing a portion of the leased premises.
The superior court implicitly denied Safeways cross-motion
concerning the sublease clause and expressly denied both parties
motions concerning whether the use clause was breached.
CG Properties then sought a ruling to establish the law
of the case regarding damages for defendants violation of the
sublease clause. CG Properties sought damages resulting from its
inability to lease the satellite building on terms as favorable
as those paid by Oaken Keg after Oaken Keg vacated the satellite
building in 1996. CG Properties argued that Oaken Keg would not
have moved from the satellite building to a location other than
the supermarket premises, even though Oaken Keg had no duty to
remain in the satellite building because its lease had expired.
Over Safeways opposition, the trial court ruled that CG
Properties was entitled to recover lost rent and remodeling
expenses pertaining to the satellite building, less an offset for
rents actually received.
The court then ordered a trial in two phases. The
first phase would be tried to the court and would concern issues
relating to the use clause. The second phase would be a jury
trial and would involve all other issues.
The court entered findings of fact and conclusions of
law following the presentation of evidence for the first phase of
the trial. The court concluded that the use clause did not
permit the sale of liquor from the supermarket premises. The
court also rejected Safeways argument that CG Properties delay in
objecting to the move signified that CG Properties did not view
the move to be a violation of the lease, notwithstanding finding
that CG Properties leasing director, Gale Bogle-Munson, knew of
the move a few weeks before it happened. The court also found
that when Mintz of CG Properties learned of the move after it
occurred, he decided to keep his options open rather than notify
CG Foods that it was in breach of the lease.4
The court next scheduled a jury trial on damages and on
Safeways affirmative defenses. But before the jury trial
concluded the court ruled (1) that the lease precluded the
affirmative defense of waiver, and (2) that the affirmative
defense of estoppel would be submitted to the jury acting as an
advisory jury.
The jury returned a special verdict finding that CG
Properties suffered past damages as a result of the breach of the
sublease clause of $172,490 and past damages for breach of the
use clause of $50,028.78. The jury also found that CG Properties
would suffer future damages flowing from the breach of the use
clause of $47,847. But the jury also found that CG Properties
was estopped from enforcing the use clause.5
Subsequently, the trial court rejected the jurys
finding regarding estoppel, concluding that there was not
evidence of an unambiguous statement or action by Plaintiff that
was inconsistent with Plaintiffs position at trial that the
parties lease did not permit the sale of alcohol on the
supermarket premises. The court also concluded that the evidence
did not support a finding that Defendants relied upon any such
statement or action by Plaintiff.
The court entered judgment in favor of CG Properties in
the principal sum of $270,365.78 (the sum of the three awards
made by the jury) plus prejudgment interest. The court also
awarded CG Properties full attorneys fees and costs approximating
$660,000.6
IV. DISCUSSION
A. Contentions on Appeal
On appeal Safeway raises issues pertaining to liability
and damages and also challenges the award of full attorneys fees.
In particular, Safeway argues that neither the sublease clause
nor the use clause was breached and, alternatively, that
CG Properties is barred by the doctrines of waiver and estoppel
from claiming that they were. With respect to damages, Safeway
contends that the claimed breaches were not the legal cause of
any damage CG Properties may have suffered and further that
duplicate damages were awarded. CG Properties offers
counterarguments on all points. Because we conclude that CG
Properties claims for breach were waived as a matter of law, it
is unnecessary to discuss the other points that Safeway has
raised.
B. Waiver
Safeways argument concerning waiver is that CG
Properties clearly manifested its acquiescence in the move of the
liquor store onto the supermarket premises. Safeway also argues
that no provision of the lease bars assertion of its waiver
defense and if there were such a provision, it would be
unenforceable. Safeway argues that the court erred with respect
to its waiver defense by granting partial summary judgment to CG
Properties concerning the sublease clause, and later by ruling
that the lease precluded assertion of the defense. Safeway
argues that the undisputed facts establish waiver as a matter of
law; alternatively, it contends that there were genuine issues of
material fact requiring a trial on the issue.
In reply CG Properties argues that the courts rulings
were correct. It contends that a no waiver clause of the lease
precluded the application of waiver. CG Properties argues
further that if the clause is invalid, it is only so when the
landlord seeks termination of the lease. Further, CG Properties
argues that even if the no waiver clause is unenforceable,
Safeways waiver defense fails on the facts and that summary
judgment in CG Properties favor was properly granted.
When a party to a contract is aware of conduct on the
part of the other party that constitutes a breach and fails to
protest the breach while continuing to perform the contract, that
party may be held to have waived its right to rely on the breach
in subsequent litigation. The seminal case in Alaska on contract
waiver is Milne v. Anderson.7 In Milne we stated:
Waiver is generally defined as the
intentional relinquishment of a known right.
However, waiver is:
a flexible word, with no
definite, and rigid
meaning in the law . . .
. While the term has
various meanings
dependent upon the
context, it is,
nevertheless, capable of
taking on a very definite
meaning from the context
in which it appears, and
each case must be decided
on the facts peculiar to
it.
A waiver can be accomplished either
expressly or implicitly. An implied waiver
arises where the course of conduct pursued
evidences an intention to waive a right, or
is inconsistent with any other intention than
a waiver, or where neglect to insist upon the
right results in prejudice to another party.
To prove an implied waiver of a legal right,
there must be direct, unequivocal conduct
indicating a purpose to abandon or waive the
legal right, or acts amounting to an estoppel
by the party whose conduct is to be construed
as a waiver.[8]
In later cases we added an objective gloss to this
formulation. [N]eglect to insist upon a right, we have said, may
result in an implied waiver, or an estoppel, when the neglect is
such that it would convey a message to a reasonable person that
the neglectful party would not in the future pursue the legal
right in question.9
The Milne case offers a valuable illustration of how
the general principles of implied waiver should be applied.
Milne involved a contract to sell real estate.10 The buyer,
Milne, purchased land and buildings from the Andersons.11 His
offer contained language to the effect that all furnishings and
fixtures on the premises would be included in the purchase. The
Andersons, who resided outside Alaska, wrote in some exceptions
to the offer specifying furnishings that they would retain.
These terms were communicated to Milnes attorney but not,
evidently, to Milne, and the warranty deed did not contain them.
Later Mr. Anderson returned to Alaska and removed some personal
property from the premises.12 Milne observed him doing this,
asked what he was doing, but made no protest. Sometime later a
bank official asked Milne to initial his approval to the language
that the Andersons had added.13 Milne refused, but made no
complaint to the Andersons. Later Milne borrowed $4,000 from
Mrs. Anderson in exchange for an unsecured promissory note. He
made payments for awhile and then defaulted. When the Andersons
attorney sent him a demand letter, Milne did not claim that he
was offsetting the balance of the note because of the property
that had been removed from the premises. But he took that
position at the trial of the suit to collect on the note. He
also claimed that he had made certain utility payments before he
took possession of the premises and these payments, too, should
be offset. The trial court held that Milne had waived his right
to claim these offsets.14 On appeal we affirmed, noting that
[t]here is substantial evidence in the record
to support an inference of waiver: Milnes
failure to complain about the utility
payments and Mr. Andersons activities on the
premises; his failure to protest when he saw
that the contract had been altered; his
continued performance under the contract,
despite his knowledge that the contract terms
had been changed; and his failure to raise
the claim of offset when Andersons attorney
demanded payment on the promissory note.
Since, from our review of the record, we are
not left with a definite and firm conviction
that a mistake has been made, the district
courts finding that Milne waived any right to
raise his claim for damages under the land
sale contract in this litigation over the
promissory note must be affirmed.[15]
In Altman v. Alaska Truss & Manufacturing Co., we had
occasion to apply the implied waiver principles announced in
Milne in the context of a lease.16 The property involved was owned
by the State of Alaska and leased under a long-term lease to
Altman.17 Altman in turn had subleased part of the property to
Alaska Truss & Manufacturing (ATM), which in turn assigned the
sublease to Woods & Rohde, d/b/a Alaska Truss & Millwork Inc.
(W&R).18 A clause in the sublease provided that if the state
increased its rate on the primary lease, the sublease rent would
be increased by the same percentage.19 On December 15, 1974, the
state increased its rent by approximately 500 percent.20 This
increase occurred in a period during which Altman, ATM, and W&R
were in a dispute as to what the appropriate rent should be for a
five-year renewal of the sublease that began on September 30,
1973.21 Although Altman was seeking a rent increase, he did not
advise ATM or W&R of the 500-percent increase in the states rent
until September 1976, and even then he did not state that he
intended to enforce the escalation provision.22 Rather, he relied
on the increased rent as a reason why ATM and W&R should agree to
an increase. It was only in 1978 when Altman filed suit that he
notified ATM and W&R that he intended to enforce the rent
escalation clause.23 The superior court held that Altman had
impliedly waived his right to enforce the escalation provision.24
On appeal we affirmed this conclusion:
As we stated in Milne v. Anderson, [a]n
implied waiver arises where the course of
conduct pursued evidences an intention to
waive a right, or is inconsistent with any
other intention than a waiver, or where
neglect to insist upon the right results in
prejudice to another party. Altmans conduct
in never insisting upon his right to enforce
the escalation provision was inconsistent
with any other intention than a waiver of his
right; furthermore, his neglect to insist
upon his right resulted in prejudice to ATM
and W & R. To have preserved his right under
the escalation provision, Altman needed only
to have notified ATM and W & R that he
intended to enforce the provision. Altman
did not do this until he filed his suit in
1978. We thus conclude that the superior
court properly held that Altman is estopped
from enforcing, and has waived his right to
enforce, the escalation provision of the
sublease.[25]
In at least two other cases we have held that a
landlord has waived its right to rely on potential lease breaches
by conduct amounting to acquiescence. Thus in Fun Products
Distributors, Inc. v. Marters a tenant gave notice of lease
renewal that was untimely under the terms of the lease and
defective in other respects.26 Thereafter the tenant continued to
make monthly rental payments that were labeled lease payments.27
For some three years the landlord gave no notice that it
considered the option to renew ineffective. The trial court held
that the option to renew the lease was not effectively exercised
and that the tenancy had become a month-to-month tenancy. On
appeal this court reversed, holding as a matter of law that the
landlord had waived its right to claim that the purported renewal
was defective:
We hold that as a matter of law where a
lessor accepts lease payments for a
substantial period of time (approximately
three years) after receipt of a tardy notice
of renewal, without advising the lessees that
the late tender of notice was considered
ineffective and without advising the lessees
that the notice was ineffective because it
was executed by only one of the lessees, the
lessor has waived the lease requirement for
notice by the lessees of renewal of or within
a certain time.[28]
In Dillingham Commercial Co. v. Spears, the lessee
sought to exercise a purchase option in the lease.29 The lessor
resisted on a number of grounds, one of which was that nearly
every payment of rent over the nine-year history of the lease had
been made late.30 The landlord had accepted the late payments
without objection but argued that a non-waiver clause preserved
her right to object to the late payments. The clause provided:
Only waivers in writing executed by Landlord shall be effective.
No delay or omission on the part of Landlord in exercising any of
its rights shall operate as a waiver of such right or any other
right.31 We observed that if literally applied, this clause would
permit the landlord to accept late payment and still assert
default of the lease. But we found that the non-waiver clause
did not preclude the defense of waiver and that the superior
court had correctly concluded that the landlords long
acquiescence constituted a waiver of her right to claim a default
for [the tenants] late payments of rent.32
Based on the above principles and our case law
application of the doctrine of waiver, we agree with Safeway that
the course of conduct of CG Properties in this case constituted
implied waiver as a matter of law. CG Properties had advance
knowledge of CG Foods intent to move the Oaken Keg store onto the
supermarket premises. CG Properties management arm, Denali
Commercial Management, assisted CG Foods in relocating the Oaken
Keg. After the relocation, while requiring that the sales
figures for the Oaken Keg be kept separate from those of the
supermarket, CG Properties combined them for the purpose of
calculating whether percentage rent should be charged to CG
Foods. Thus, CG Properties had full knowledge of the relocation,
and facilitated it, and also had full knowledge of the continued
sales of liquor by the Oaken Keg store from within the
supermarket premises. CG Properties general manager, Mintz, upon
learning of the relocation made a conscious decision not to
protest it, preferring a wait-and-see approach in order to be
able to select the most economically favorable choice as events
unfolded. He maintained this posture for the better part of the
next six years. Meanwhile, Mintz signed a sworn statement that
there are no defaults in connection with the leases in the
shopping center in order to obtain a large loan for CG
Properties. In addition, at the time of Safeways acquisition of
CG Foods, Safeway sought information and a certificate as to
whether CG Foods was in default on the lease. CG Properties had
a duty to declare itself on that subject, but did not claim that
a default existed. Instead it maintained its non-committal
stance.
These acts except for the statement made to obtain the
loan prejudiced CG Foods and Safeway. Timely notice that the
relocation violated the lease would have afforded CG Foods the
opportunity to reconsider its position. It could have declined
to make the move thus saving the expense of altering the
supermarket premises or sought to amend the lease.33 Further, if
Safeway had been told that CG Foods was in breach of its lease in
the Wasilla Center and had a potential six-figure liability to
CG Properties it could have declined to purchase CG Foods,
offered a lower price, or sought a bond to protect it against
potential damages. Because of CG Properties failure to claim
that the relocation breached the lease, CG Foods and Safeway had
no occasion to pursue these options.34
This combination of acquiescence and assistance in the
relocation, consciously declining to declare a breach, even upon
request, and prejudice is inconsistent with any conclusion other
than that CG Properties waived its right to claim that the lease
was breached.35
C. The Non-Waiver Clause Applies Only to Future Breaches.
The non-waiver clause on which CG Properties relies
states:
The failure of either party to insist in any
one or more instances upon the strict
performance of any one or more of the . . .
terms . . . of this Lease . . . shall not be
construed as a waiver or relinquishment for
the future . . . of the right to exercise
such right [or] remedy . . . .
Under this clause, CG Properties failure to insist on strict
performance of the lease on one occasion does not waive its right
to insist on strict performance on a future occasion. But this
clause does not state that a failure to insist on strict
performance on one occasion will waive the right to claim a
default for the conduct on that occasion. The clause, if
anything, implies that failure to insist on the performance of a
right on one occasion will be a waiver of the right to declare a
breach for that occasion. Thus, the non-waiver clause means that
Safeway could not, in reliance on CG Properties failure to insist
on strict performance of the lease in connection with the Oaken
Keg relocation, in the future move some other business onto the
supermarket premises in violation of the use and sublease
clauses. But nothing in the clause suggests that the waiver of
these clauses as to the Oaken Keg move would be ineffective.
V. CONCLUSION
Having concluded that CG Properties waived any right to
claim that CG Foods breached the sublease or use clauses by
moving the Oaken Keg liquor store onto the supermarket premises
and that no provision of the lease prevents such a waiver from
taking effect, we REVERSE the judgment of the superior court and
REMAND this case for further proceedings consistent with this
opinion.
_______________________________
1 Two-thirds of the stock of Denali Commercial
Management, Inc., was owned by Carr-Gottstein entities and one-
third was owned by CG Acquisition Co., an investment company
created by Green that later became CG Foods. Denalis president
was Robert Mintz, the general manager of CG Properties.
2 The breakpoint for percentage rent was not met until
the second quarter of 2001; until then no percentage rent was
charged.
3 The lease provided that if a party refused for ten days
to execute an estoppel certificate after a formal request, which
could be made at any time, the requesting party had the authority
to sign certificates on behalf of the refusing party. Under this
authority Safeway signed the certificates (stating there were no
defaults) on CG Properties behalf after the litigation began, but
the superior court found this to be ineffective for the purposes
of estoppel.
4 The court found that Mintz decided to wait until he
could assess the economic ramifications of the move before
deciding how to proceed.
5 The jury was instructed that the essential elements of
equitable estoppel were whether (1) plaintiff asserted an
unambiguous position, by conduct or by making a statement or
statements, that is contrary to its contention in this trial that
[CG Foods] violated the use clause; and (2) that [CG Foods]
reasonably relied on plaintiffs asserted position.
6 The court based the award of full fees on the language
of a guaranty clause signed by Safeway that the court interpreted
to call for such an award.
7 576 P.2d 109 (Alaska 1978).
8 Milne, 576 P.2d at 112 (citations omitted).
9 Anchorage Chrysler Ctr., Inc. v. DaimlerChrysler Corp.,
129 P.3d 905, 917 n.35 (Alaska 2006) (citing Wausau Ins. Cos. v.
Van Biene, 847 P.2d 584, 589 (Alaska 1993)).
10 Milne, 576 P.2d at 110.
11 Id. at 111.
12 Id. at 110-11.
13 Id. at 111.
14 Id. at 111-12.
15 Id. at 112-13 (footnote omitted).
16 Altman v. Alaska Truss & Mfg. Co., 677 P.2d 1215, 1223
(Alaska 1983).
17 Id. at 1217-18.
18 Id. at 1215, 1217-18.
19 Id. at 1217.
20 Id. at 1218-19.
21 Id. at 1217-18.
22 Id. at 1218-19.
23 Id. at 1219-20.
24 Id. at 1220, 1223.
25 Id. at 1223 (citation omitted).
26 559 P.2d 1054, 1056-57 (Alaska 1977).
27 Id. at 1057.
28 Id. at 1058.
29 641 P.2d 1, 2 (Alaska 1982).
30 Id. at 7-8.
31 Id. at 7.
32 Id. at 7-8.
33 When CG Properties first gave notice of the breach, on
February 22, 2002, it offered a number of options that are like
those that could have been explored six years earlier:
We believe that either the lease should
be renegotiated or the unapproved use should
cease. Several options come to mind. You
can move the liquor operation into a vacant
space in the shopping center under a new
Oaken Keg lease. Alternatively, you can
amend the Carrs lease to add the sale of
liquor as an approved use in exchange for an
increase in Carrs minimum rent equivalent to
the rent that would be paid were you to move
the liquor store into its own space.
Finally, you can amend the Carrs lease to
allow the sale of liquor as an approved use
in exchange for relinquishing the prohibition
against the landlord leasing space in the
shopping center to other liquor sellers. We
are, of course, open to other suggestions you
may have.
34 Preserving the opportunity to cure defects in
performance and opening the way to settlement negotiations are
two of the interests that underlie the statutory waiver provision
of AS 45.02.607. Subsection (c)(1), which is section 2-607(3)(a)
of the Uniform Commercial Code, requires a buyer of goods who
discovers a breach to notify the seller within a reasonable time
or be barred from a remedy. Such notice, we have observed,
provides the seller a chance to correct any defect, Shooshanian
v. Wagner, 672 P.2d 455, 462 (Alaska 1983) (quoting Prutch v.
Ford Motor Co., 618 P.2d 657, 661 (Colo. 1980)), and open[s] the
way for normal settlement through negotiation. Armco Steel
Corp. v. Isaacson Structural Steel Co., 611 P.2d 507, 512 (Alaska
1980) (quoting U.C.C. 2-607, Official Comment 4). The rule
requiring notice also is designed to defeat commercial bad faith
by protecting against stale claims arising out of transactions
which a buyer has led [a seller] to believe are closed. Id.
35 This conclusion is supported by case law from other
jurisdictions involving use clause violations acquiesced in by a
landlord. See Sol Apfel, Inc. v. Kocher, 61 N.Y.S.2d 508, 512
(Sup. 1946) (holding that lessor waived complaint for breach of
lease by permitting lessee to carry on manufacturing operations
from the outset without objection and aiding in the installation
of necessary equipment for manufacturing); Malley v. Thalheimer,
44 Conn. 41, 1876 WL 1754, at *1-2 (Conn. 1876) (holding lessors
complaint that lessee breached lease by adding a restaurant to a
saloon waived because the lessor knew of lessees alterations and
expenditures fitting up the restaurant and did not object); see
also Milton R. Friedman, Friedman on Leases 7:3.6, at 7-78 to 7-
79 & nn. 315-16 (Patrick A. Randolph, Jr., ed., 5th ed. 2007)
(Waiver may also occur by other behavior, as where with knowledge
and without objection a landlord permits his tenant to make
improvements or other expenditures in reliance and to his
prejudice.).
These authorities and our own cases such as Milne,
Altman, Fun Products, and Dillingham Commercial suggest that the
traditional verbal formulation for implied waiver is not as
demanding as it sounds. What the cases have in common is
knowledge on the part of the party charged with waiver of facts
giving rise to a right to assert a breach (or claim a contract
benefit as in Altman), unreasonable delay in asserting a breach
(or claiming a benefit), and acceptance of continued performance.
Frequently there is also prejudice often because failure to
protest deprives the other party of an opportunity to cure even
if prejudice is not discussed. Little or no attention is paid to
whether the party charged with waiver actually intended to
relinquish a known right. At least one respected text, Calamari
and Perillo on Contracts, recognizes the problems with the
traditional formulation. The text says of the voluntary and
intentional relinquishment of a known right definition that
there are few, if any, more erroneous
definitions known to the law. For one thing,
waiver is far more multifaceted than this
definition would allow for. Moreover, even
as far as it goes, it is totally misleading.
It strongly implies that the waiving party
intends to give up a right. In reality,
many, if not most waivers are unintentional
and frequently do not involve a right that
the party is aware of.
Joseph M. Perillo, Calamari and Perillo on Contracts 11.29, at
458 (5th ed. 2003).
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