Opinion
43986 Record No. 780924.
June 6, 1980
Present: All the Justices.
Landlord's right to terminate lease not waived by receipt of partial payments from lessee when sublessee's breach continues; landlord not estopped from terminating lease by failure to give lessee informal notice of sublessee's default.
(1) Landlord and Tenant — Lease Agreement — Landlord's Right to Terminate not Waived by Acceptance of Partial Payments from Lessee when Breach of Sublessee Continues.
(2) Landlord and Tenant — Lease Agreement — Termination of Lease — Landlord not Equitably Estopped.
The RFP (landlord) leased two warehouses to GASCO. The lease agreement provided a right of termination in event of default for thirty days after written notice to the tenant and thirty days for tenant to cure the default. GASCO later sublet one warehouse to AFA. The landlord, GASCO and AFA were parties to the Indenture of Sublease which provided: (1) AFA would pay its monthly rent (which was less than the amount owed by GASCO to landlord under the original lease) directly to landlord; (2) landlord would bill GASCO for the difference each month; and (3) GASCO assumed liability to landlord for AFA's performance. AFA was in default for all rents due after December 1, 1973. GASCO twice inquired of landlord by telephone as to AFA's rental account, but because of bookkeeping errors did not learn of the rental delinquency until landlord notified GASCO by letter dated May 31, 1974 of AFA's default and landlord's intention to terminate the lease and sublease unless the default was cured within thirty days. The default was not cured by June 30, 1974 and by letter dated July 8, 1974 additional notice of termination was given GASCO. AFA's arrearage was never paid, and landlord leased the warehouse to another tenant. GASCO filed a motion for judgment against landlord alleging the lease was terminated improperly by the letter dated July 8, 1974. The Trial Court entered summary judgment for the landlord. GASCO contends on appeal that there were jury questions relating to landlord's waiver of its right to terminate the lease and estoppel.
1. The landlord's acceptance of GASCO's monthly rent after posting the first termination letter does not constitute a waiver by landlord of its right to terminate the lease for default of the sublessee. When breach of the lease is a continuing one, the right of termination continues also. Eagler v. Little, 217 Va. 869, 234 S.E.2d 242 (1977) followed.
2. The landlord had no duty under the lease to notify GASCO of AFA's default other than by notice of termination. Neither is there evidence that landlord intended to mislead GASCO. The mistaken information concerning AFA's arrears given GASCO by telephone does not estop landlord from enforcing the lease.
Appeal from a judgment of the Circuit Court of Arlington County. Hon. Paul D. Brown, judge presiding.
Affirmed.
John H. Ariail, Jr. (Tolbert, Smith, Fitzgerald Ramsey, on brief), for appellant.
Fred C. Alexander, Jr. (Boothe, Prichard Dudley, on brief), for appellee.
In this appeal we determine whether the Richmond, Fredericksburg and Potomac Railroad Co. (RFP) is liable in damages for terminating a lease and sublease involving commercial property in Arlington County.
RFP leased two warehouses to General Appliance Storage Co. (GASCO). Paragraph 16 of the lease gave RFP the right to terminate the lease in event of default for thirty days in the payment of any rent therein reserved, provided GASCO failed to cure the default within thirty days after notice.
Later an Indenture of Sublease was executed by RFP as "Lessor," GASCO as "Lessee," and AFA Importers, Ltd. (AFA), as "Sublessee," subletting one of the warehouses to AFA, a beverage distributor, for the remainder of the lease term. AFA agreed to pay its monthly rental directly to RFP, but since the amount due by AFA was less than the amount owed by GASCO to RFP under the original lease, RFP was required to send a monthly bill to GASCO for the difference, approximately $430.00 per month. Under the sublease, GASCO assumed liability to RFP for the performance by AFA of all the covenants and agreements in the original lease, including the obligation to pay rent in the event AFA defaulted in the payment thereof.
GASCO continued to pay its monthly rental as billed, but AFA was in default for all rents due after December 1, 1973. GASCO twice inquired of RFP as to AFA's rental account, but, because of bookkeeping errors at RFP, GASCO did not learn of the rental delinquency. By letter dated May 31, 1974, RFP notified GASCO that because of AFA's default in payment of the rent, RFP was cancelling the lease unless the default was cured within the thirty-day period. The default was not cured by June 30, 1974, and by letter dated July 8, 1974, received by GASCO on July 10, 1974, additional notice was given to GASCO.
This letter stated in pertinent part:
Notification is hereby given to you in accordance with Paragraph 16 of the above-mentioned Lease, that AFA Importers, Ltd, is in default of rental payments for a period exceeding the 30 day period with a total amount due Railroad from December 1973 through May 1974 of $23,356 including real estate taxes and, therefore, the Railroad Company is cancelling the said lease and sublease as of June 30, 1974, unless said default is cured by that date.
As you know, both GASCO and AFA are responsible for the rental obligations, and as provided in the lease and sublease, the cancellation of this lease does not relieve you of the obligations assumed therein.
In the event this default is not properly cured, it is requested that the premises be left in a neat, clean and orderly condition upon your vacation of the premises and that you forward me the keys to this building.
This letter stated in pertinent part:
This is with further reference to my letter to you dated May 31, 1974, by which the RFP Railroad Company cancelled the Deed of Lease dated April 1, 1961, Supplemental Letter Agreement dated November 9, 1970, and Indenture of Sublease dated January 16, 1973, as of June 30, 1974, unless default in rental payments is cured by that date.
Since said default was not cured by June 30, 1974, the purpose of this letter is to further assert Railroad's termination notice and advise each of you that the total amount due Railroad through June 30, 1974, is $27,216 including real estate taxes. In addition, both GASCO and AFA are responsible to Railroad for this monetary obligation and, as provided in the Lease and Sublease, the cancellation of these instruments does not relieve you of the obligations assumed therein.
The arrearage was never paid, and RFP took possession of the two buildings and leased them to a third party. On July 21, 1977, GASCO filed a motion for judgment against RFP, alleging that the lease was terminated by RFP by its letter of July 8, 1974, that the termination and repudiation of the lease was improper, that it was in violation of the lease, and that GASCO had suffered damages as a result of the termination and repudiation of the lease.
In the trial court summary judgment was entered for the defendant. The lower court held that RFP had properly terminated the lease.
In its decision of March 16, 1978, the trial court held in part:
I hold that the notice of July 8, received July 10, was a sufficient notice under the lease; and that any earlier waivers were ineffective.
I hold that GASCO, as of July 10, should have realized it had thirty days under the lease to get the rent paid. It did not, by its own statement. Indeed, GASCO, while not physically occupying Building number 2, never physically entered it on AFA Importer's leaving, it did not claim possession of it; it acceded to the railroad's demand for possession of it.
Further, on August 16, 1974, GASCO's President . . . wrote Whitmore of the railroad, saying in part, ". . . would you please consider reinstatement of our Ball Street lease and assignment of the sublease to Freeman along the lines we originally had with AFA?"
GASCO contends on appeal that jury questions were presented as to whether RFP had waived its right to terminate the lease and whether RFP was estopped to assert its right of termination, and thus the lower court erred in withholding those issues from jury determination.
I. WAS THE DEFAULT WAIVED?
The contention of GASCO is that it first learned of the delinquent rent from AFA when, on June 7, 1974, it received the letter from RFP dated May 31, 1974. After posting the letter, RFP received GASCO's monthly check of approximately $431.00, which was the difference between what AFA owed and the total rent on the properties. This acceptance of rent, GASCO argues, was a waiver by RFP of its right to terminate the lease.
In this connection it is to be remembered that the letter of May 31 was reiterated and reemphasized by the letter of July 8, 1974, which was received July 10, and thereafter nothing was paid.
We believe that this phase of the case is controlled by our holding in Eagler v. Little, 217 Va. 869, 872, 234 S.E.2d 242, 244 (1977), where this court said: " 'The waiver of one forfeiture is of course not a waiver of a subsequent forfeiture: And if the act of forfeiture be continuing, a waiver of a right of re-entry for one breach will not preclude a re-entry for a new or continuing breach.' " (Emphasis added.)
The breach of the lease was a continuing one, and under these circumstances the right of termination was continued.
II. WAS RFP ESTOPPED?
GASCO says in its brief that the facts which create an estoppel are essentially those relied upon in the waiver arguments. We conclude that the result is the same as reached on the waiver arguments.
In essence, GASCO is saying that certain telephone calls of March 1 and April 17 to RFP, which resulted in GASCO not receiving the correct information as to the indebtedness of AFA, plus another telephone conversation of June 7, in which GASCO was told that the letter of May 31 was just a formality to get action from AFA, created equitable estoppel against RFP. In effect, the Lessee contends that the Lessor is estopped to collect its rent or enforce the termination provisions of the lease because the Lessor gave incorrect information as to the rental account of the Sublessee.
GASCO certainly knew on June 7 that the rent was substantially in arrears and would have to be paid by it if not by AFA. There was no duty under the lease for RFP to notify GASCO that AFA was in arrears, and there was no showing that RFP intended to mislead GASCO. Since AFA was occupying property adjacent to GASCO, and its occupancy was by virtue of a sublease from GASCO, GASCO at all times had available this source of information concerning the status of the rental account.
The elements of equitable estoppel have not been proved and are not available here to defeat the termination. See Boykins Corp. v. Weldon, Inc., 221 Va. 81, 266 S.E.2d 887 (1980), this day decided.
We hold that the evidence presented no factual issues for the jury to resolve and that the trial court was correct in entering summary judgment for the defendant. For these reasons the order appealed from will be
Affirmed.