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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Sengul v. CMS Franklin, Inc. (12/9/2011) sp-6624
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, email
corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
SAMUEL SENGUL, )
) Supreme Court Nos. S-13552/13582
Appellant and )
Cross-Appellee, ) Superior Court No. 1JU-06-00979 CI
)
v. ) O P I N I O N
)
CMS FRANKLIN, INC. and ) No. 6624 - December 9, 2011
ROBERT MANUS, )
)
Appellees and )
Cross-Appellants. )
)
Appeal from the Superior Court of the State of Alaska, First
Judicial District, Juneau, Patricia A. Collins, Judge.
Appearances: John M. Rice, Law Offices of John M. Rice,
P.C., Juneau, for Appellant/Cross-Appellee. Paul M.
Hoffman, Hoffman Silver Gilman & Blasco, P.C., Juneau, for
Appellees/Cross-Appellants.
Before: Carpeneti, Chief Justice, Fabe, Winfree, Christen,
and Stowers, Justices.
FABE, Justice.
CHRISTEN, Justice, dissenting.
I. INTRODUCTION
In late April 2006 Samuel Sengul leased a commercial storefront in
downtown Juneau to Robert Manus, who was acting on behalf of CMS Franklin, Inc.
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The building was under construction when Sengul and CMS entered into the lease
agreement, but the lease provided that Sengul would deliver the property to CMS in a
specified improved condition by the time the lease commenced on June 1, 2006. The
lease also included a rent abatement provision, which is at issue in this case because the
building was not in the promised improved condition until approximately June 8, 2006.
Manus did not pay any rent, nor did he mention the rent abatement provision when he
took possession of the building, when the lease commenced, or when he opened CMS's
store in mid-June. Sengul finally demanded rent in late July, but Manus refused to pay,
claiming abatement. In September, Manus had still not paid any rent, and Sengul put a
lock on CMS's store door and placed signs demanding rent in the store windows. Manus
had the lock cut off, but began to move the inventory out of CMS's store, vacating it and
returning the keys to Sengul two days after the lockout. Sengul then sued CMS and
Manus for unpaid rent.
The superior court determined that CMS had waived its right to rent
abatement and owed Sengul unpaid rental amounts for the time that Manus had occupied
the building. But the superior court also concluded that Sengul's lockout amounted to
constructive eviction and awarded CMS damages as a refund for work performed on the
premises that CMS was unable to benefit from after the constructive eviction.
We agree with the superior court that Sengul's actions constituted
constructive eviction, but we disagree that CMS waived its entitlement to have the rent
abated. We remand for the superior court to recalculate the damages owed to CMS.
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II. FACTS AND PROCEEDINGS
A. Facts
On or about April 30, 2006, Samuel Sengul and the president of CMS
Franklin, Inc. (CMS), Robert Manus, entered into a five-year lease for part of a
commercial storefront building in downtown Juneau. The building was still under
construction when Sengul and CMS entered into the lease agreement. The parties
apparently hoped that the storefront would be completed by mid-May 2006 in time for
the beginning of the 2006 summer tourist season, but the lease contained certain
provisions outlining how the lease terms would change if the storefront was not in a
specified improved condition by the time the lease was set to begin on June 1, 2006.
Several provisions of the lease are relevant to this appeal.
First, the lease provided: "Subject to completion of Landlord Work and
vacant, 'broom-clean' delivery of Store Space 2 to Lessee, with a certificate of
occupancy in place for the Building, this Lease commences on June 1, 2006." The term
"Landlord Work" was defined in section 3.01(E) of the lease, which required Sengul to
deliver the building to CMS in "[v]anilla box, finished condition." This included: four
walls painted to CMS's color specification, the floor ready for carpet or wood tiling, a
fully finished bathroom, and "[a]n official certificate for occupancy of the Building . . .
permitting [CMS's] use and occupancy."
The lease set the rent at $10,000 per month through May 31, 2007, with
increases each year thereafter. CMS was to pay rent "commencing on the first day of the
term of the lease." CMS also had to pay Juneau sales tax on the monthly rent, which
amounted to an additional $500 per month. But the lease included a rent abatement
provision:
If Lessor's Work [defined in Section 3.01(E)] is not
completed by May 15th, 2006, and the Leased Property is not
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delivered to Lessee in vacant, finished condition for Lessee's
sole possession and improvements, then Lessor shall abate
the rent per month for the first year of the lease by an
additional 3 days for every day of delay. If the Leased
Property is not delivered in vacant, finished condition with
Lessor's Work completed by June 1, 2006, a rent abatement
of 4 days will apply for each day the Leased Property is not
finished to the standard set forth in Landlord's Work, E.,
below. If the Leased Property is still not delivered in finished
condition with Landlord's Work completed by June 15, 2006,
Lessee at its option, may cancel this Lease or continue to
receive a 4 day abatement for each day of non-delivery.
In addition, the lease included terms and conditions related to default. It
defined default as including failure to pay rent within ten days of Sengul providing notice
that rent was due. And it provided that upon default, Sengul, "in addition to any rights
and remedies that may be given . . . by statute," could "choose to do the following, singly
or in combination: (a) After legal process on notice, reenter the Leased Property and
take possession thereof and remove all property from the same, except inventory."
Finally, the lease contained a provision regarding waiver, which stated:
No failure by either Lessor or Lessee to insist upon the
strict performance by the other of any covenant, agreement,
term, or condition or to exercise any right or remedy
consequent upon a breach thereof shall constitute a waiver of
any such breach or of such covenant, agreement, term, or
condition.
CMS took possession of the building on or about April 30, 2006. At that
time, contractors were still working on the building and, among other things, there was
no certificate of occupancy. Over the next few weeks, a contractor made repairs and
adjustments to both Sengul's and CMS's retail spaces in the building. Due to issues with
the sprinkler system, Sengul was unable to obtain a certificate of occupancy for the
storefront until June 8. Sengul opened his store that same day, but CMS did not open its
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store until about a week later, apparently because it was waiting for the contractor to
finish certain improvements to the space.
Though CMS occupied the storefront for the next month and a half, it did
not make any rent or security deposit payments to Sengul. According to Sengul, he and
Manus spoke two or three times in June and July, and Manus stated: "I know I'm late.
I'm going to pay you in full, and I'm going to make it up to you." Manus, however,
claims that Sengul did not ask for rent until late July and alleges that he responded that
CMS did not owe any rent because the building was not ready until mid-June, and thus
the rent was abated.
On July 25 Manus sent a letter to Sengul's attorney, contending that rent
should have been abated due to the delay in having the building ready; he conceded that
CMS owed Sengul the security deposit. Sengul's attorney responded to Manus in
August, explaining that Manus was not entitled to rent abatement because, "[b]y
accepting possession of the property and failing to provide any sort of notice to
Mr. Sengul[,] [CMS] . . . waived any right it may have had to a penalty under
section 3(D) of the lease." The letter also warned that if CMS did not pay the full
amount of rent and security deposit within ten days, Sengul would consider the lease in
default and would seek all legal remedies, including eviction. Manus replied to Sengul's
attorney on August 16, again claiming that the rent should have been abated and offering
to pay $8,000 to remain in the storefront through the end of September.
On September 4, 2006, Manus or one of his staff arrived at CMS's store to
find that Sengul had placed a cable lock on the front door. Manus immediately called
a contractor, who came to the store and broke the lock. Manus was locked out of the
store for a couple of hours before the contractor cut the lock off. Sengul also placed
signs in CMS's store window reading "Your Rent is Due. Pay it" and similar statements.
Manus testified that whenever he tried to remove the signs, Sengul or his staff would put
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them back up. Sengul also allegedly threatened to put the lock back on the door the next
day.
Manus began moving CMS's inventory from Sengul's building to another
store location down the street later that same day. The next day, CMS's attorney sent a
letter to Sengul's attorney, claiming that "[w]ithout notice or cause, [Sengul] on Monday
improperly and illegally padlocked the premises; by doing so precluded CMS access to
inventory; [and] committed slander and committed tortious interference with CMS's
business activities and contracts." CMS's attorney informed Sengul's attorney that CMS
was moving out of the building and that Sengul could pick up the keys the next day.
Manus removed the entire inventory from the store before the end of the day on
September 6.
The storefront space CMS had leased remained vacant from September 6
until May 2007. In May 2007 Sengul leased the space to another tenant for $14,800 per
month, approximately the same amount that CMS would have owed beginning in
June 2007 pursuant to the lease had CMS continued to rent the space.
B. Proceedings
On September 13, 2006, Sengul sued CMS and Manus. Sengul claimed
that CMS was liable for the full amount of lease payments over the five-year term of the
lease.1 CMS responded that the rent should have been abated because it could not open
for business until mid-June, and that Sengul constructively evicted CMS in September.
CMS also counterclaimed for breach of contract, intentional interference with
prospective business, breach of the implied covenant of good faith and fair dealing, and
defamation.
1 Sengul also alleged that Manus should be individually liable for any debts
of CMS.
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On January 14, 2009, the superior court held a bench trial. The superior
court explained that CMS had been entitled to rent abatement, but found that Manus had
waived this right by failing to raise the issue with Sengul earlier in the course of the
lease. The superior court thus concluded that CMS owed rent for June, July, August, and
part of September.
Turning to the alleged constructive eviction, the superior court observed
that Sengul's self-help actions of locking CMS's store door and placing signs in the
windows were, although permitted by statute, prohibited pursuant to the terms of the
lease. The superior court concluded that CMS had been constructively evicted as of
September 6 when Manus returned the store's keys to Sengul.
2
Thus, while Sengul was awarded the value of the unpaid rent ($33,570 ),
the superior court awarded CMS damages equal to the cost of renovating the storefront
space because "these improvements would have been of value to [CMS] but for the
constructive eviction." The superior court calculated the amount of CMS's
improvements as $53,365.09, offset that amount by the unpaid rent owed to Sengul, and
awarded CMS $26,795.09, plus costs and prejudgment interest. Sengul appeals, and
CMS cross-appeals.
III. STANDARD OF REVIEW
Whether a party's actions constitute constructive eviction is a mixed
question of fact and law; we apply our independent judgment to the question of law and
review the trial court's factual findings for clear error.3
2 $10,500 for the months of June, July, and August, and six days' worth of
rent at $345 per day for September 1 through September 6.
3 See Ben M. v. State, Dep't of Health & Soc. Servs., Office of Children's
Servs., 204 P.3d 1013, 1018 (Alaska 2009).
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Questions of contract interpretation are questions of law that we review de
novo, but findings of fact on questions created when the meaning of contract language
is dependent on conflicting extrinsic evidence are reviewed for clear error.4
A superior court's determination whether waiver occurred is a question of
fact that we review for clear error.5
IV. DISCUSSION
Sengul argues that the superior court: (1) erroneously concluded that the
lockout constituted constructive eviction; (2) erroneously found that CMS made
improvements to the storefront that justified a damages "setoff"; (3) failed to determine
Manus's personal liability; and (4) improperly calculated damages. In response, CMS
maintains on cross-appeal that the superior court incorrectly determined that it had
waived its entitlement to rent abatement. We consider the constructive eviction issue and
the waiver issue in turn.
A. Sengul Constructively Evicted CMS.
The superior court concluded that Sengul constructively evicted CMS by
"[p]adlocking Manus'[s] door and advising that he would do it again the next day, along
with posting multiple 'pay up' signs on [the] store's windows." Sengul asserts that he
had a right to take these actions as detainer6 and maintains that his actions did not
4 Norville v. Carr-Gottstein Foods Co., 84 P.3d 996, 1000 n.1 (Alaska 2004)
(holding that questions of fact are created when the meaning of contract language is
dependent on conflicting extrinsic evidence); Ben M., 204 P.3d at 1018 (stating that trial
court's factual findings are reviewed for clear error).
5 Miscovich v. Tryck, 875 P.2d 1293, 1302 (Alaska 1994) (citing Fun Prods.
Distribs., Inc. v. Martens, 559 P.2d 1054, 1058 (Alaska 1977); Alaska R. Civ. P. 52(a)).
6 Detainer is a term of art defined as "[t]he action of detaining, withholding
or keeping in one's possession." BRYAN A. GARNER, A DICTIONARY OF MODERN LEGAL
(continued...)
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constitute the type of substantial interference that would amount to constructive eviction.
We cannot agree. Under the terms of the lease Sengul had no right to lock CMS out as
an act of detainer, and physically excluding CMS from the building amounted to
constructive, if not an actual, eviction.
1. Sengul had no right to lock CMS out under the lease's terms.
7
Alaska Statute 09.45.690, which applies to commercial leases, states:
"Unless otherwise provided in the lease, a landlord has a right to re-enter leased premises
when a tenant fails to pay rent, and may bring an action to recover the possession of the
premises."8 Sengul appears to rely on this provision, arguing without citation to any
legal authority that he "had a clear right to detainer since this was a commercial lease."
The superior court recognized the availability of a self-help remedy under
this statute; however, focusing on the phrase "[u]nless otherwise provided in a lease,"
the superior court turned to the lease between Sengul and CMS. In relevant part, the
lease states that in the event of CMS's unpaid rent Sengul was permitted to, "in addition
to any rights and remedies that may be given to [him] by statute . . . [a]fter legal process
on notice, reenter the Leased Property and take possession thereof." (Emphasis added.)
The superior court reasoned that "[i]f the intent of the lease were to allow reentry/seizure
of the premises without legal process or notice, there would be little reason" for the "after
6(...continued)
USAGE 270 (2d ed. 2001).
7 Presumably AS 09.45.690 applies only to commercial leases; in 1974 the
Alaska legislature passed AS 34.03.250(b), which explicitly abolished distraint for rent.
8 AS 09.45.690; see also Klosterman v. Hickel Inv. Co., 821 P.2d 118, 122
(Alaska 1991) (explaining that a landlord could engage in a self-help remedy in response
to the tenant's nonpayment of rent because the lease at issue "expressly permit[ted] the
lessor to re-enter the property upon the lessee's failure to pay rent").
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legal process on notice" clause. Thus, the superior court concluded that Sengul "lacked
authority to simply padlock the doors of [CMS's] store without some 'legal process,'
particularly as the parties were still attempting to reach resolution of their dispute." We
agree with the superior court that, reading the statutory provision and the lease terms
together, Sengul did not have a right to lock CMS out for nonpayment of rent without
prior legal process.
2. Sengul's actions constituted constructive eviction.
Constructive eviction is a defense to a landlord's action for payment of
rent.9 We have explained that a tenant can invoke a constructive eviction defense when
there has been a substantial interference with the tenant's use of the leased premises.10
To claim constructive eviction a tenant must: (1) notify the landlord of the interference;
(2) give the landlord a chance to remedy the problem; and (3) vacate the property within
a reasonable time.11 Here, it is undisputed that Sengul was notified of the interference
because he was the one who caused it. Sengul did not remedy the problem; instead
Manus had to call a contractor to remove the lock from CMS's store door. Manus moved
9 Hrubes v. Smith, Mem. Op. & J. No. 626, 1992 WL 12549972, at *2-3
(Alaska, June 30, 1992) (citing RESTATEMENT (SECOND) OF PROPERTY § 5.4 & cmt. b
(1977)).
10 King v. Petroleum Servs. Corp., 536 P.2d 116, 120 (Alaska 1975); see also
3 MILTON R. FRIEDMAN & PATRICK J. RANDOLPH, JR ., FRIEDMAN ON LEASES § 29:3.1
(5th ed. 2011) ("Constructive eviction is defined as any disturbance by landlord . . . that
(1) renders the leased premises unfit for the purpose leased, or (2) deprives the tenant of
the beneficial enjoyment of the premises.") (internal citation omitted).
11 Hrubes, 1992 WL 12549972, at *3; see also 3 FRIEDMAN & RANDOLPH,
supra note 10, § 29:3.1 (explaining that "[i]t is not a constructive eviction unless tenant
surrenders possession of the premises, and does so within a reasonable time after the
condition arises").
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CMS's inventory and returned the key to Sengul by September 6, two days after the
lockout.12
Sengul maintains that his actions were "simply not enough" to substantially
interfere with CMS's possession of the property. The superior court disagreed,
concluding: "Padlocking [CMS's] door and advising that he would do it again the next
day, along with posting multiple "pay up" signs on a store's windows[,] constitutes
substantial interference with [CMS's] use of the leased premises." The superior court
thus determined that the constructive eviction was effective as of September 6, 2006.
To support his claims on appeal, Sengul cites King v. Petroleum Services
Corp., where we held that a landlord's actions in reentering a leased premises did not
substantially interfere with the tenant's use of the premises.13 But as CMS points out, the
situation in King was markedly different. In King, the tenant had already abandoned the
premises and the landlord's reentry "was primarily to safeguard [the tenant's] property
and was not the cause of [the tenant's] abandonment of the premises."14 We thus
reasoned in King that there was "no evidence . . . of actual interference with [the
tenant's] use of the leased premises."15 But in this case CMS had not abandoned the
12 Sengul appears to imply that Manus vacated the storefront on September 6
because the tourist season was over, not because of the lockout. But both Sengul and
Manus testified that the tourist season lasts until late September, and Manus added that
the last weeks of the season are important because vendors try to sell all of their
inventory to avoid paying to ship it back. There is no evidence that Manus would have
closed his store on September 6 but for Sengul's actions.
13 536 P.2d at 120.
14 Id.
15 Id.; cf. Hrubes, 1992 WL 12549972, at *3 (determining that ineffective
repairs resulting in a "known structural susceptibility to earthquakes" was a substantial
(continued...)
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storefront before being locked out, and Sengul's actions certainly were not intended to
safeguard CMS's property. Clearly, Sengul did actually interfere with CMS's use of the
property by locking the store's door and preventing Manus, his staff, and potential
customers from entering the store during business hours.16 Sengul testified that this was
his exact intent in executing the lockout - to "prevent [Manus] [from] coming in."
We agree with the superior court that Sengul's actions constituted at least
a constructive eviction. Indeed, a physical exclusion from leased premises, such as a
lockout, is an oft-cited example of an actual eviction. "An actual eviction of the tenant
is a physical exclusion of the tenant from access to the leased premises,for example, by
locking the tenant out of the premises."17 Courts in other jurisdictions have agreed that
a landlord's physically excluding a tenant from the premises is an actual eviction.18
15(...continued)
interference with a lessor's intended use of subleasing the building and upholding a
superior court's finding of constructive eviction).
16 The record also suggests that Sengul may have physically stood in the
doorway to prevent Manus's handyman from removing the padlock.
17 2 RICHARD R. POWELL & PATRICK J. ROHAN, POWELL ON REAL PROPERTY
§ 16B.02[2][a] (Michael Allan Wolf, ed., 2010) (emphasis added); see also DAVID S.
HILL, LANDLORD AND TENANT LAW IN A NUTSHELL 26 (3d ed. 1995) ("To constitute an
actual eviction there must be a wrongful physical expulsion or exclusion of the tenant
from the leased premises by the landlord. For example, where a landlord physically bars
a tenant from entering the premises, or . . . padlocks the entrances to the premises, there
has been an actual eviction [and] the tenant's liability for all rent is suspended.").
18 See, e.g., Turks Head Realty Trust v. Shearson Lehman Hutton, Inc., 736
F. Supp. 422, 428 (D. R.I. 1990) (holding that plaintiff wrongfully evicted defendant
when it changed the locks on defendant's commercial building and citing Rhode Island
law that "any intentional act or conduct by the landlord . . . which deprives a lessee of
his or her rightful possession constitutes an eviction"); Village Commons, LLC v. Marion
Cnty. Prosecutor's Office, 882 N.E.2d 210, 216 (Ind. App. 2008) (determining that
(continued...)
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While neither party argued that CMS was actually evicted, the fact that a
lockout generally is an example of an actual eviction supports CMS's constructive
eviction claim because constructive eviction arguably broadens the circumstances in
which a tenant may invoke an eviction defense: "Interferences by the landlord that fall
short of a physical exclusion, but that nevertheless substantially interfere with the
tenant's enjoyment of the premises, causing the tenant to vacate, are actionable by the
tenant as 'constructive' evictions."19 As one treatise explains, the related doctrines of the
covenant of quiet enjoyment and constructive eviction "evolved historically from a
protection against physical expulsion into a protection against interference by or through
the landlord with the beneficial enjoyment of leased premises."20 Just as a lockout is a
18(...continued)
landlord's instructing a tenant to vacate a space prone to water damage constituted an
actual eviction, which the court defined as "when the tenant is deprived of the occupancy
of some part of the demised premises") (citation omitted); Echo Consulting Servs., Inc.
v. North Conway Bank, 669 A.2d 227, 229 (N.H. 1995) ("The landlord's actual physical
dispossession of the tenant from the leased premises constitutes an actual eviction, either
total or partial."); Barash v. Penn. Terminal Real Estate Corp., 256 N.E.2d 707, 710
(N.Y. 1970) ("[W]here the landlord changes the lock, or padlocks the door, there is an
actual eviction.").
19 2 POWELL & ROHAN, supra note 17, § 16B.03[1] (emphasis added); see
also RESTATEMENT (SECOND) OF PROP.: LANDLORD & TENANT § 6.1 reporter's note 2
(1977) ("The common law has recognized two types of eviction: actual eviction, in
which the landlord deprives the tenant of physical possession of the leased property, and
constructive eviction, in which the landlord so deprives the tenant of the use of the
property that his action is tantamount to depriving the tenant of physical possession.")
(emphasis added).
20 3 FRIEDMAN & RANDOLPH,supra note 10, § 29:1; see also 49 AM . JUR . 2D
Landlord and Tenant § 515 (2011) ("[T]he ancient rule of the common law that entry
and expulsion, or some real disturbance of the possession, was required to establish
eviction of a tenant by the landlord has been so far modified in favor of the tenant that
(continued...)
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traditional actual eviction claim, classic constructive eviction cases are often based on
circumstances such as failure to repair a premises,21 and the doctrine is "broad enough
to include many different situations where the whole or a substantial part of the premises
is rendered unfit for the purpose for which is was leased."22 It would make no sense for
us to recognize that Sengul's lockout of CMS was an actual eviction but decline to
uphold the superior court's constructive eviction determination. Thus, Sengul's lockout,
which was a physical exclusion of CMS, was a substantial interference with CMS's use
of the storefront and at the very least constituted constructive eviction.
B. CMS Did Not Waive Its Right To Rent Abatement.
CMS argues on cross-appeal that it had a right to abate the rent, that it did
not waive this right, and that it owed no unpaid rental amounts at the time of the
constructive eviction.23 The superior court found that CMS had been entitled to a rent
abatement under the terms of the lease. The superior court then discussed whether CMS
20(...continued)
actual ouster or physical dispossession is no longer necessary to constitute an eviction.").
21 Eugene L. Grant, Disturbing Concepts: Quiet Enjoyment and Constructive
Eviction in the Modern Commercial Lease, 35 REAL PROP. PROB . & TR . J. 57 (2000)
("[A] modern constructive eviction occurs when a landlord's acts substantially deprive
a tenant of beneficial enjoyment of the premises, including access to . . . goods and
services. . . . The most common ground for constructive eviction claims probably is a
landlord's failure to repair defects in the premises.").
22 3 FRIEDMAN & RANDOLPH, supra note 10, § 29:3.1 (collecting examples of
conditions sufficient to support constructive eviction actions, including "landlord's
failure to repair the leased premises," "landlord's failure to supply essential services,"
"periodic flooding," "mold and mildew problems," and "interference with access,
easements, and deprivation of light and air") (internal citations omitted).
23 Sengul did not file a reply brief and did not address these issues in his
opening brief.
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waived this entitlement. Weighing against waiver, the superior court recognized that the
lease contained a non-waiver clause, that it was unclear that Sengul could have remedied
the defects had Manus mentioned them earlier, and that Sengul did not bring up
abatement when he delivered the property to Manus in an unimproved condition. But
the superior court ultimately concluded that CMS waived its entitlement to abatement
based on "[t]he combination of consciously declining to timely invoke the rent abatement
lease provision, promises to pay rent (that [Manus] only later claimed he did not owe),
and prejudice to Sengul in being left unable to timely respond and potentially remedy
claimed defects." CMS disagrees, arguing that the finding of waiver was erroneous
because the lease's non-waiver provision precluded a finding of implied waiver, and
because the language in the lease made abatement mandatory such that Manus did not
have to mention the clause to Sengul to invoke abatement.
1. The non-waiver clause and the mandatory language of the rent
abatement provision indicate that CMS did not waive its
entitlement to rent abatement.
As the superior court recognized, neither the fact that the lease included a
non-waiver provision, nor the mandatory language of the abatement provision,
absolutely precludes the conclusion that CMS waived its right to abatement. Neither,
however, does our case law demand that waiver be found in this case.
The superior court relied upon Carr-Gottstein Foods Co. v. Wasilla, LLC24
to support the finding of a waiver. In that case, a tenant shopping center moved a liquor
store closer to a supermarket without obtaining permission from its landlord.25 The
landlord was aware of the relocation and made no objection, even bidding on electrical
24 182 P.3d 1131 (Alaska 2008).
25 Id. at 1133.
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work for the relocation.26 Six years later, the landlord informed the supermarket that it
considered the liquor store relocation to be a breach of the lease.27 Carr-Gottstein is not
directly applicable here because the non-waiver provision in that case dealt expressly
with the waiver of future rights or remedies based on a prior, single instance of waiver,
not waiver of the immediate breach as in this case.28
In Dillingham Commercial Co. v. Spears, we considered a non-waiver
clause similar to the one in this lease and held that the non-waiver clause did not
foreclose waiver; one party's "long acquiescence constituted a waiver of her right" even
though the contract included a general non-waiver provision.29 Here, the time between
the signing of the lease and Manus's first mention of the abatement provision was less
than three months, and the time lapse between the start of the abatement period (May 15)
and Manus's first mention of abatement was even less30 - a little over two months.
Although the dissent emphasizes that those months were at the height of the summer
26 Id.
27 Id. at 1134.
28 Id. at 1140 (concluding that "[t]he 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 breachfor that occasion ") (emphasis added).
29 641 P.2d 1, 7-8 (Alaska 1982) (concluding that a landlady waived her right
to claim a default despite the presence of a non-waiver provision where the landlady
accepted late rental payments from the tenant for nine years without complaint and only
mentioned the tenant's breach when the tenant tried to exercise the lease's purchase
option).
30 Though there is some evidence that Manus may have indirectly raised
abatement in emails sent in April and May, the superior court found that Sengul credibly
testified that he did not receive either email, neither email specifically mentions
abatement, and CMS does not mention either email in its appellate brief.
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tourist season, the key inquiry in Dillingham was whether one party's acquiescence
"lulled [the other party] into inaction."31 After nine years of late payment of rent without
objection from the landlady, we concluded in Dillingham that the tenant was lulled into
a belief that such lateness was acceptable.32 Here, however, it is unlikely that Manus's
failure to mention the abatement provision "lulled" Sengul into delaying getting the
certificate of occupancy because Sengul had his own independent motivation to obtain
the certificate (opening his own store), and because he did in fact obtain the certificate
and open his own store as soon as the building was in compliance on June 8. Therefore,
while the superior court was correct that a non-waiver clause does not always bar a
finding of implied waiver, because there was no unreasonable acquiescence on CMS's
part in this case, the non-waiver provision supports CMS's argument that it did not waive
its entitlement to abatement.
The superior court also found it important that Manus "did not invoke or
mention the rent abatement provision of the lease to Sengul until raising it in late July,
when Sengul began pressing for payment of rent." The superior court added that
"although the rent abatement provision was a specifically-negotiated part of the lease,
Manus gave no notice of his intent to rely on the provision until he received the first
demand for rent." We conclude that notice was not required based upon the plain
language of the lease.
In relevant part, the abatement provision's language states that "Lessor
shall abate the rent" and "a rent abatement of 4 days will apply"; the lease defines the
words "shall" and "will" as mandatory. CMS maintains that this language indicates that
31 Dillingham Commercial Co., 641 P.2d at 8 n.10 (quoting Summa Corp. v.
Richardson, 564 P.2d 181, 185 (Nev. 1977)).
32 Id. at 7-8.
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abatement was "self-executing" and therefore CMS did not have to provide Sengul with
notice that CMS intended to rely on it. CMS thus contends that Manus did not mention
abatement until Sengul demanded rent in late July because Manus assumed that both
parties understood that the rent was being automatically abated. The mandatory nature
of the rent abatement provision is evident from the plain language of the lease. And
though we have held that a party can implicitly waive its contractual rights regardless of
the self-executing language of a contract provision,33 we conclude that in this instance
CMS's conduct was insufficient to amount to an implied waiver.
2. CMS's words and conduct did not result in an implied waiver.
We established in the seminal case of Milne v. Anderson that waiver of a
contractual right may be either express or implicit, and that 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."34 We explained that implied waiver may be
demonstrated by either: (1) "direct, unequivocal conduct indicating a purpose to
abandon or waive the legal right," or (2) "acts amounting to an estoppel by the party
33 See Altman v. Alaska Truss & Mfg. Co., 677 P.2d 1215, 1223 (Alaska
1983).
34 576 P.2d 109, 112 (Alaska 1978); see also Carr-Gottstein Foods Co., 182
P.3d 1131, 1136 (Alaska 2008) ("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.").
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whose conduct is to be construed as a waiver."35 But we have cautioned that "the
standard for an implied waiver is high and factual findings are required."36
When analyzing the first way that Manus could have implicitly waived
CMS's entitlement, the superior court found that Manus made "promises to pay rent (that
he only later claimed he did not owe)." Sengul testified that he had at least two
conversations with Manus in June and July where Manus stated: "I know I'm late. I'm
going to pay you in full, and I'm going to make it up to you"; "I know I'm late, but I'll
pay it"; and "I know I owe you, and I'm late, but I'll make it up." But these statements,
even as Sengul relates them, are ambiguous regarding what Manus meant by "pay you
in full," "I'll pay it," and "I owe you." Aside from rental payments, Manus owed Sengul
a security deposit that he had not paid. Thus, Manus's statements that he owed Sengul
and would pay "it" cannot be construed as "direct, unequivocal conduct" indicating that
Manus intended to waive his right to abatement.
But aside from direct, unequivocal conduct, Manus could also have
implicitly waived CMS's entitlement to abatement through estoppel. In this context,
estoppel exists when there is "assertion of a position by word or conduct, reasonable
reliance thereon by another party, and resulting prejudice."37 This is an objective test;
"neglect to insist upon a right only results in an estoppel" when a party's words or
conduct "would convey a message to a reasonable person that the neglectful party would
35 Milne, 576 P.2d at 112.
36 Anchorage Chrysler Ctr., Inc. v. DaimlerChrysler Corp., 129 P.3d 905, 917
(Alaska 2006).
37 Wausau Ins. Cos. v. Van Biene, 847 P.2d 584, 588 (Alaska 1993).
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not in the future pursue the legal right in question."38 Here, we do not need to reach the
first two prongs of the estoppel inquiry - asserting a position and reasonable reliance -
because we conclude that the superior court's determination that Sengul was prejudiced
by Manus's failure to explicitly invoke his right to abatement earlier than late July was
error.
Sengul claimed that "[i]f Manus had indicated that there was a problem then
Sengul would have had an opportunity to do something to ensure the penalties would not
apply[,] such as . . . having the contractor focus solely on finishing [CMS]'s store." The
superior court, apparently looking to this statement, found that Manus's failure to
mention abatement prejudiced Sengul because he was "left unable to timely respond and
potentially remedy claimed defects." But this finding is inconsistent with at least two
other findings made by the superior court: that the earliest Manus could have opened his
store was June 8, when the temporary certificate of occupancy was issued, and that the
delay in obtaining the certificate "was tied to problems with the sprinkler system -
beyond Manus' control or obligation as a tenant."39 The testimony of Sengul's
contractor confirms that the delay in obtaining the certificate of occupancy was due to
the building's sprinkler system and fire alarms, neither of which were within CMS's
control or exclusive to CMS's part of the building. Therefore, even if Sengul had
directed the contractor to "focus solely on finishing [CMS]'s store," the certificate could
not have been obtained sooner because the barriers to compliance were present
throughout the building. Moreover, Sengul had his own independent motivation to
bring the building into compliance as quickly as possible - he could not open his own
38 Id. at 589.
39 Indeed, the superior court recognized that "it is not clear whether the
Certificate of Occupancy could have been obtained earlier regardless of effort."
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store without obtaining a certificate of occupancy and he did in fact open his store on the
same day that the temporary certificate was obtained. We therefore cannot agree with
the superior court that Sengul could have "remed[ied] claimed defects" had Manus raised
the rent abatement issue earlier. Because Manus's failure to mention the abatement
provision until late July did not prejudice Sengul, we conclude that CMS did not
implicitly waive its entitlement to rent abatement.
C. The Superior Court's Damages Calculation
Because we conclude that CMS did not waive its right to abatement, we
remand to the superior court to recalculate damages owed to CMS. Because CMS will
still owe Sengul some unpaid rent even after abatement is applied pursuant to the terms
of the lease,40 we briefly consider Sengul's argument that the value of the amount of
unpaid rent should be calculated using the yearly rental value rather than the monthly
rental value. Specifically, Sengul maintains that due to the "unique nature of the
businesses that lease this property," which is to cater to tourists and remain open only
during the summer months, any unpaid rent should be valued based on the yearly rental
value.
We conclude that it is correct to use the monthly rental value in calculating
unpaid rent. The lease required payments of "Ten Thousand dollars ($10,000.00) per
month, through 5/31/2007." CMS still owed rent during the non-summer months,
regardless of whether its store was open. Accordingly, CMS should not owe more than
the lease's rental obligations require. Had the parties wished to do so, they could have
40 Per the lease's terms, CMS is entitled to 83 days of rent abatement
(May 15-31st = 17 days, multiplied by the three-day penalty = 51 days. June 1-8 =
8 days, multiplied by the four-day penalty = 32 days). Factoring in these 83 days, Sengul
is entitled to unpaid rent from August 23 through the date of the constructive eviction,
September 6.
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drafted the lease to require that all rental payments be made during the summer, with no
rental obligation during the off-season, but they did not do so and we decline to do it for
them. CMS is only required to compensate Sengul for any unpaid rent as calculated
based on the monthly rental amount.
D. Other Issues
Sengul raises two additional issues on appeal - that CMS's work on the
storefront did not constitute improvements that entitled CMS to a "refund" after Sengul's
constructive eviction, and that the superior court failed to address Manus's personal
liability. CMS urges that Sengul's briefing on these issues is inadequate. We agree that
Sengul abandoned these issues because he failed to provide any more than cursory
briefing devoid of citation to legal authority, and we do not consider them here.41
V. CONCLUSION
We AFFIRM the superior court's determination that the lockout constituted
constructive eviction. We REVERSE the superior court's conclusion that CMS waived
its entitlement to rent abatement and REMAND for proceedings consistent with this
opinion.
41 See Jurgens v. City of North Pole, 153 P.3d 321, 326 (Alaska 2007) ("An
issue is considered abandoned . . . if the appellant inadequately briefs the issue."); A.H.
v. W.P., 896 P.2d 240, 243 (Alaska 1995) (deeming points on appeal waived where the
appellant "provide[d] no citation of legal authority" and made only "cursory and
undeveloped" arguments).
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CHRISTEN, Justice, dissenting.
I write separately to express my disagreement with the court's conclusion
that CMS did not waive its right to abatement.
As the court notes, in Milne v. Anderson, we held that an implied waiver
may be demonstrated by either: (1) "direct, unequivocal conduct indicating a purpose
to abandon or waive the legal right," or (2) "acts amounting to an estoppel by the party
whose conduct is to be construed as a waiver."1 The court also recognizes that a superior
court's determination whether waiver occurred is a question of fact that we review for
clear error.2 In my view, the trial court's findings of fact support its ruling that Manus
engaged in "direct, unequivocal conduct indicating a purpose to abandon or waive" the
right to claim abatement.
After conducting a bench trial in this case, the superior court found that
"[b]etween April and July, Sengul and Manus had a cordial relationship, although Manus
paid neither the rent nor the deposit" and "Manus told Sengul on several occasions that
he knew he was late with the rent and that he would shortly pay Sengul in full." The
superior court found that Manus made statements in June and July like "I know I'm late.
I'm going to pay you in full, and I'm going to make it up to you," and that Manus "did
not invoke or mention the rent abatement provision of the lease to Sengul until raising
it in late July, when Sengul began pressing for payment of rent." As the trier of fact, the
superior court found that "it is most likely that Manus did not raise any rent abatement
claim until pressed to pay the rent and security deposit because he was in default of his
obligation to pay the security deposit and lacked the funds or desire to pay his bills."
1 576 P.2d 109, 112 (Alaska 1978).
2 Miscovich v. Tryck, 875 P.2d 1293, 1302 (Alaska 1994) (citing Fun Prods.
Distrib., Inc. v. Martens, 559 P.2d 1054, 1058 (Alaska 1977)).
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In reversing the superior court's decision, our court finds support in its
comparison of the facts of this case to the facts of Dillingham Commercial Co., Inc. v.
Spears, where we held that one party's "long acquiescence" to a specific condition
constituted a waiver of her rights under a lease.3 The court compares the "long
acquiescence" in Dillingham Commercial to the period at issue in this case - the
interval between the signing of the lease and Manus's first mention of the abatement
provision, in late July - and describes the latter as a period of "less than three months."
A period of "less than three months" may not be significant in the context of some
commercial leases, but viewed in the context of the short summer tourist season in
Juneau, Manus's delay effectively wiped out Sengul's ability to collect rent for an entire
year. As the superior court recognized:
The reason for Manus['s] silence regarding the rent
abatement clause likely has its root in the nature of the
summer tourist season in Juneau and Manus['s] personal
financial situation. Small stores in the prime tourist/cruise
ship location, such as this small space, can garner annual
rents of $126,000 per year, as with this lease, even though the
stores are only open for approximately four months per year
during the summer season and closed the remainder of the
year. Thus, the "real" rent for such space when rented on an
annual basis (or in this case five years) is effectively about
$30,000 - $40,000 per month for actual months of operation.
When viewed in this light, early invocation of the rent
abatement provision of approximately $31,759 was relative
"small change" in view of the long-term lease.
Manus made no mention of the abatement clause until late July, and
continued to operate his business in Juneau's "prime tourist/cruise ship location"
3 641 P.2d 1, 8 (Alaska 1982).
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storefront space until early September 2006 without paying rent. Predictably, after he
vacated the premises, the space remained vacant until May 2007.
Given the context of this lease, I view Dillingham Commercial 's reference
to one party's "long acquiescence" as reinforcing the superior court's finding that Manus
waived the right to claim rent abatement. The combination of Manus's statements that
he had failed to pay rent, his acknowledgment that he owed rent, his repeated promises
to pay the rent, and his failure to mention rent abatement until two-thirds of the tourist
season had passed, support the superior court's finding that Manus waived the right to
claim abatement. Because the record supports the superior court's findings of fact and
conclusions of law, I respectfully dissent from the court's decision that Manus did not
waive the right to abatement.
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