Gagnon v. Veum

169 N.W. 174, 40 N.D. 563, 1918 N.D. LEXIS 108

• Court: North Dakota Supreme Court
• Decided: September 26, 1918
• Status: Published

Opinions

Birdzell, J.

This is an action under the Forcible Entry and Detainer Statute to recover possession of certain hotel property, with damages for its detention. On the lYth of March, 1916, the plaintiff, Gag-non, leased the property in question to the defendant, Yeum, at a rental of $100 per month. The term of the lease was one year from April 15th, 1916, and the lessee stipulated for the right to use the premises for “any respectable and legal business.” It was agreed that the lessee should have the privilege of rerenting for another period of twelve months after the expiration of the lease, and upon the back of the form lease was a stipulation as follows: “It is hereby understood and agreed that in case the party of the first part disposes of the property leased by the party of the second part the term of this lease will expire November 15th, 1916, and if sold before that date the rent money will be paid at the place stated in this contract and to the credit of the new owner.. It is also understood and agreed that in case of a sale of the property the privilege of rerenting the property will be null and void.”

On November 13th, 1916, the plaintiff served notice on the defendant to the effect that he had sold the property, and that, under the provisions of the lease, the term would expire on November 15th, 1916. Veum refused to yield possession, whereupon the forcible entry and detainer proceedings were begun which have culminated in this appeal.

The action was originally begun in justice court, but after an appeal to the district court an amended complaint was filed, containing, among other allegations, an allegation of damages occasioned to the plaintiff by reason of the withholding of the possession from November 15th, 1916, to the date of the suit, at $200 per month less a credit at the rate of $100 per month for an advance payment of rent made by the defendant on November 10th, before the receipt of the notice of cancelation. In the district court a demurrer was interposed to the complaint which was overruled. The defendant then moved to strike from the complaint the above allegation of damages, which motion was granted. This appeal is taken from the order striking the foregoing allegation from the complaint.

The contract of sale upon which the plaintiff bases his right to cancel the lease is made a part of the complaint, and by it the plaintiff “sells and agrees to convey” to one Yern Austin, “by good and sufficient deed of warranty on the prompt and full performance” of the said contract the property in question. The purchaser agrees to pay $7,000, $100 down and $6,900 deferred, and for the furniture and fixtures he is to pay invoice price plus 10 per cent and the freight. The contract contains other stipulations whereby the plaintiff vendor is to have general charge of and control over the hotel property to pay the expenses of operation, the purchaser to receive as his compensation for services in conducting the hotel one fourth of the gross receipts of which he “shall become the full and absolute owner.” This arrangement was to continue until the furniture and necessary improvements had been paid for in full, after which time the party of the second part was to pay $800 and be given full control of the hotel and receive all the income therefrom, paying thereafter on the purchase price $300 per month on the first day of each month. The above is a sufficient statement of the provisions of the contract of sale to indicate the nature of the arrangement made between the vendor and the purchaser and the rights of the respective parties thereunder. It is clear from an examination of the contract that it was intended the hotel business should be continued on the premises; that the vendor was to receive three fourths of the gross receipts from which were to be paid the expenses of operation; and that this arrangement was to continue until a certain portion of the deferred payments to be made by the purchaser had been realized.

Whether or not the net portion of the three fourths of the gross receipts was pledged to the vendor for the deferred payments is not exactly clear from the contract, but it is perhaps a fair inference that it was to be applied. However this may be, it is clear that nothing was reserved to the vendor except three fourths of the proceeds of the operation of the hotel during the period when it was contemplated the business should be conducted by the vendor and the vendee jointly under the vendor’s supervision. Nothing whatever is stated in the contract with reference to the right of possession as between vendor and purchaser prior to the time when the provisions of the contract governing the operation of the hotel become operative. It was, of course, contemplated that possession should be obtained on November 15th, in which event the provisions above referred to would have become operative immediately. Had the provisions of the contract become operative, obviously the question now before us could not have arisen. But, since the possession was not surrendered, and since it is impossible that the provisions controlling the operation of the hotel business by the vendor and the purchaser could apply, the question as to whose is the right to recover damages for use and occupation or a reasonable rental of the property during the period of wrongful holding over, if shown to exist, must be determined by the application of the elementary principles affecting the rights of vendor and purchaser. Rents, in the absence of a contract to the contrary, belong to the owner. The contract of sale effects an equitable conversion of the property, the purchaser being henceforth regarded as the owner. The risk of loss is upon him and he has the corresponding right to the benefits accruing to the owner. The plaintiff in this case, having canceled the lease, has terminated the tenancy previously existing between him and the defendant, and from the date of the cancelation forward the defendant, so long as he retains possession, is deriving a benefit for which compensation must be made to the one entitled thereto. The rents have not been reserved to the plaintiff, for his contract embraces only three fourths of the receipts to be derived from operating the hotel business. This cannot, in any sense, be regarded as a reservation of rent while the property is in the possession of a third party. Since the plaintiff by his contract has not reserved such benefit to himself, it follows that it must accrue to the purchaser.

For the above reasons we are of the opinion that the order of the trial court, striking from the complaint the allegation under which the plaintiff seeks to recover the reasonable rental for the period referred to, is proper and the order is affirmed.