PHILPOT v. BOUCHELLE

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Docket Number

No. AC-357.

Attorney(S)

Marlin M. Feagle, Lake City, for appellant. Frederick L. Koberlein of Brannon, Brown, Norris, Vocelle, Haley, Brown Robinson, Lake City, for appellee.

Judges

ERVIN, Judge.

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Smart Summary

Factual and Procedural Background

On or about June 10, 1979, John Philpot (the lessor) and Edwin L. Bouchelle, Jr. (the lessee/appellee) entered into a 12-month lease agreement for Philpot's condominium unit. The lease term extended from June 15, 1979 to June 14, 1980, with monthly rent payments of $450 totaling $5,400 annually. The lease included an option for the appellee to purchase the property between November 15, 1979 and April 15, 1980, contingent on certain conditions, including timely rent payments and a minimum of $2,500 in property improvements completed and documented by November 15, 1979.

The appellee exercised the option by letter on April 11, 1980, but the appellant responded on April 16, 1980, asserting that the appellee had failed to satisfy conditions precedent, including late rent payments and incomplete improvements. Subsequently, the appellee vacated the condominium under threat of eviction and sued for breach of contract. The case proceeded to a jury trial, resulting in a verdict against Philpot for breach of the lease/option contract. Philpot appealed the final judgment, challenging the denial of his motions for directed verdict.

Legal Issues Presented

Whether the trial court erred in denying appellant's motions for directed verdict based on the appellee's failure to satisfy the conditions precedent to exercise the purchase option.
Whether the appellant waived his rights under the lease contract by accepting late rent payments and improvements despite the contractual clause stating acceptance of late performance does not waive rights.
Whether the appellant properly preserved the issue for appellate review.

Arguments of the Parties

Appellant's Arguments

The trial court erred in refusing to grant directed verdict motions because the appellee failed to satisfy the conditions precedent of timely rent payments and documented improvements as required by the lease/option contract.
The appellant did not waive his rights despite accepting late payments, as paragraph 15 of the contract explicitly preserved his rights notwithstanding acceptance of late performance.
The appellant preserved the issue for appeal by moving for a directed verdict at multiple stages during the trial, including at the charge conference.

Appellee's Arguments

The appellee contended he substantially complied with the conditions of the lease and option, including making improvements and paying rent, albeit late.
The appellee argued that the appellant accepted late payments "graciously," evidencing waiver of strict compliance with the contract terms.
The appellee maintained that he had the improvements under contract by the deadline and ultimately completed over $2,500 worth of improvements, submitting documentation to the appellant.
The appellee asserted he was unaware of the appellant's limited endorsements on rent checks disclaiming waiver or declaring the option null and void.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
6551 Collins Avenue Corp. v. Millen, 104 So.2d 337 (Fla. 1958)	Preservation of issues for appellate review through motions for directed verdict.	Confirmed that the appellant properly preserved the issue for review by timely motions for directed verdict.
Farmers' Bank and Trust Co. v. Palms Pub. Co., 86 Fla. 371, 98 So. 143 (1923)	A lessor is estopped or waives forfeiture if accepting rent with knowledge of breach.	Discussed the general rule of waiver/estoppel regarding acceptance of rent after breach.
Moskos v. Hand, 247 So.2d 795 (Fla. 4th DCA 1971)	Same as above; estoppel and waiver principles in lease forfeitures.	Supported the common law rule on waiver and estoppel.
Shouse v. Doane, 39 Fla. 95, 21 So. 807 (1897)	Time is of the essence provisions can be waived by the party benefiting.	Acknowledged that time is of the essence clauses may be waived absent contractual modification.
Karbelnig v. Brothwell, 244 Cal.App.2d 333, 53 Cal.Rptr. 335 (1966)	Validity of contractual waiver clauses preserving lessor's rights despite acceptance of late rent.	Analogized to uphold paragraph 15 clause, rejecting implied waiver from acceptance of late payments.
In re: Wil-Low Cafeterias, Inc., 95 F.2d 306 (2d Cir. 1938), cert. denied, 304 U.S. 567	Supporting authority on waiver provisions in contracts.	Referenced as additional authority sustaining contractual waiver clauses.
Vintaloro v. Pappas, 310 Ill. 115, 141 N.E. 377 (1923)	Similar contractual waiver clauses upheld.	Provided further support for contractual modification of waiver/estoppel rules.
U.S.A. Petroleum Corp. v. Jopat Building Corp., 343 So.2d 501 (Ala. 1977)	Upheld contractual provisions limiting waiver by acceptance of rent.	Reinforced the validity of contractual clauses like paragraph 15.

Court's Reasoning and Analysis

The court first determined that the appellant properly preserved the issue for appeal through multiple motions for directed verdict, citing 6551 Collins Avenue Corp. v. Millen. The court then examined the lease/option contract's terms, focusing on the conditions precedent for exercising the purchase option, including timely rent payments and documented improvements.

While the appellee admitted to late payments and incomplete improvements by the deadline, he argued substantial compliance and waiver by the appellant's acceptance of late payments. The court acknowledged the general common law principle that acceptance of rent with knowledge of breach can constitute waiver or estoppel, citing Farmers' Bank and Trust Co. and Moskos v. Hand.

However, the court found that paragraph 15 of the contract explicitly provided that the lessor's rights were cumulative and that acceptance of late performance would not operate as a waiver. This contractual provision modified the common law rules of waiver and estoppel. The court noted no Florida precedent addressing such a clause but relied on analogous decisions from other jurisdictions, especially Karbelnig v. Brothwell, which upheld similar waiver provisions.

The court concluded that because the appellant acted consistently with paragraph 15 by accepting late payments without expressly waiving rights, he did not waive the appellee's failure to satisfy the option conditions. The acceptance of late rent and improvements did not amount to a waiver or estoppel under the contract's terms.

Accordingly, the trial court erred in denying the appellant's motions for directed verdict, as there was no breach by the appellant.

Holding and Implications

The judgment of the trial court is reversed.

The court held that the appellant lessor did not waive his contractual rights despite accepting late payments and improvements because of the explicit non-waiver clause in paragraph 15 of the lease/option contract. Consequently, the conditions precedent to exercise the purchase option were not met, and the appellant was not in breach of contract. The case is remanded for further proceedings consistent with this opinion.

This decision directly affects the parties by negating the jury verdict against the appellant and clarifying the enforceability of contractual clauses that modify waiver and estoppel principles. No new precedent beyond this case-specific interpretation was established.

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JOHN V. PHILPOT, APPELLANT, v. EDWIN L. BOUCHELLE, JR., APPELLEE.

ERVIN, Judge.

Philpot (the lessor) appeals from a final judgment entered in accordance with a jury verdict finding him in breach of a lease/option to purchase contract. Philpot contends that the trial court erred in refusing to grant his motions for directed verdict. We agree and reverse.

First, we reject the appellee's argument that the appellant did not properly preserve the issue for review. The record reveals that the appellant made a motion for directed verdict both at the close of the appellee's case-in-chief and at the close of the case. Additionally, he renewed his motion at the charge conference after all the the evidence had been presented. Therefore, the issue has been preserved. See 6551 Collins Avenue Corp. v. Millen, 104 So.2d 337 (Fla. 1958).

As to the merits of the appeal, the record reveals that on or about June 10, 1979, the parties entered into a 12-month lease agreement providing for the rental of Philpot's condominium unit, which agreement, by its terms, extended from June 15, 1979 to June 14, 1980. The appellee agreed to pay the annual sum of $5,400, in increments of $450 per month, beginning the 15th day of each month. Paragraph 14 of the lease provided that appellee could exercise his option to purchase from November 15, 1979 to April 15, 1980. The appellee was to provide $1,000 in consideration in the form of personal note that was payable within 90 days to the appellee. It was also provided that the lessee/appellee was to spend a minimum of $2,500 for the purpose of installing carpeting, window tint, sun shading, interior painting, double glass thermal, and noise resistant windows within five months after the execution of the lease. And the lessee was required as of November 15, 1979, to furnish the lessor with "satisfactory evidence" of $2,500 worth of completed improvements. If these improvements were not documented by that date, the option was to be null and void.

Paragraph 15 of the contract provides:

The rights of the lessor under the foregoing shall be cumulative and the failure on the part of the lessor to exercise properly any rights given hereunder shall not operate to forfeit any of the said rights.

(e.s.)

Paragraph 16 of the contract further provides: "It is understood and agreed between the parties hereto that time is of the essence of this contract and applies to all terms and conditions contained herein."

The appellee wrote to the appellant on April 11, 1980, informing him that he desired to exercise the option. The appellant replied by letter dated April 16, 1980, that the appellee had not satisfied the conditions precedent to the permissible exercise of the option due to his failure to pay timely the monthly rental amounts, and to install no less than $2,500 in improvements to the unit pursuant to the terms of the agreement. The appellee, under threat of eviction, moved out of the condominium on June 23, 1980. Shortly thereafter, the appellee sued for breach of contract. The case then proceeded to a jury trial.

The appellee's case-in-chief at trial consisted primarily of his testimony. He testified that he substantially accomplished all the conditions of the lease and the option. Although he admitted that his rent payments and the payment on the note had been late, he stated that the appellant had accepted all of his late payments "graciously." He also admitted that all of the $2,500 worth of improvements had not been completed by November 15, 1979, but that he did have all the improvements under contract at that time. He testified that he had replaced the carpets in the condominium, which constituted the major share of the $2,500 by the time he moved into the condominium in June, 1979, and that he had returned the old carpets to the appellant. He admitted, however, that the appellant did not actually see the new carpet installed inside the condominium, or know its exact cost. The appellee's wife nevertheless testified that the appellant's wife had seen it within the unit. The appellee also testified that he ultimately made over $2,500 worth of improvements to the condominium, and he furnished documentation of these improvements when requested by the appellant in his letter of April 16, 1980. The other improvements consisted of vinyl tiling work and new curtains. According to the appellee, the appellant never warned him that his late performance caused a forfeiture of the option until the appellee received the April 16 letter from the appellant. The appellee, moreover, testified that he did not notice the appellant had endorsed the reverse side of his rent payment checks with limited endorsements to the effect that the payments were accepted under protest; that the option was considered null and void; that the lease had been broken and that the appellant now considered the rental to be on a month-to-month basis. Although he did not scrutinize the endorsements, he admitted that his accountant normally processed his checks and thoroughly reviewed them.

The appellant testified in defense that the purpose of the conditions of the options, which was communicated to the appellee at the time of the execution of the lease, was to provide assurances to appellant by November 15, 1979, that the appellee intended to exercise the option in order for appellant to purchase other property in New Port Richey. He did not deny that he allowed tardy performance on the early rent payments and on the note; however, in January, 1980, he informed the appellant that the option in the lease had been broken because of the appellant's untimely payments. At that time, the appellee tendered late checks for the October, November and December rental months. The appellant also admitted that while he suspected the appellee had placed new carpeting in the condominium, he did not have any actual knowledge of this prior to April, 1980.

If not for paragraph 15 of the parties' contract, we would agree that the issue as to whether the appellant waived the conditions necessary to the exercise of the option was a jury question and that there was competent, substantial evidence supporting the jury's decision. The law is clear that a lessor is estopped to assert a forfeiture for a breach of covenant or condition in a lease, or waives his right to such a forfeiture, if, after the breach of covenant, he accepts rent from his tenant with knowledge or full notice thereof. Farmers' Bank and Trust Co. v. Palms Pub. Co., 86 Fla. 371, 98 So. 143 (1923); Moskos v. Hand, 247 So.2d 795 (Fla. 4th DCA 1971). Even when time is made of the essence of a contract, such provision can also be waived by the party to whom the benefit inures. Shouse v. Doane, 39 Fla. 95, 21 So. 807 (1897).

The difficulty in applying the above rule to the case before us is that the parties contractually agreed in paragraph 15 that the acceptance of late performance by the lessor would not constitute a waiver of the lessor's rights. Thus, the lessor, by accepting appellee's late performance, can hardly be considered as dealing inconsistently with the terms of the contract.

We consider that the parties contractually modified the common law rules of waiver and estoppel, and their modification does not conflict with any public policy. We have found no Florida cases, nor have the parties cited any, which deal with a clause such as the one provided in paragraph 15 of the lease. Other jurisdictions, however, have upheld the validity of clauses similar to those stated in paragraph 15. See Karbelnig v. Brothwell, 244 Cal.App.2d 333, 53 Cal.Rptr. 335 (1966); In re: Wil-Low Cafeterias, Inc., 95 F.2d 306 (2d Cir. 1938), cert. denied, 304 U.S. 567, 58 S.Ct. 950, 82 L.Ed. 1533; Vintaloro v. Pappas, 310 Ill. 115, 141 N.E. 377 (1923); U.S.A. Petroleum Corp. v. Jopat Building Corp., 343 So.2d 501 (Ala. 1977). Karbelnig v. Brothwell, supra, is particularly instructive. There a lower court held that the lessor's acceptance of the lessee's late payment of rent constituted a waiver of the contractual terms regarding breach. The lower court arrived at this conclusion even though paragraph 27 of the lease contract provided as follows:

WAIVER. A waiver by Lessor of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant, or condition or any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of rent hereunder by Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of any term, covenant or condition of this lease, other than the failure of lessee to pay the particular rental so accepted, regardless of Lessor's knowledge of such preceding breach at the time of acceptance of such rent.

In its reversal, the California appellate court concluded:

The express agreement on the part of the lessees, which was binding upon the assignees, to the effect that the acceptance of rent by the lessor after knowledge of the breach of a covenant should not be deemed a waiver of such breach, is tantamount to a relinquishment of the right of the lessees and their assignees, to assert a waiver of estoppel, unless there has been an express waiver on the part of the lessor of the right reserved, or there has been conduct on the part of the lessor, other than the acceptance of rent, upon which the lessees or their assignees could lawfully assert an estoppel or declare a forfeiture.

Karbelnig, supra, at 53 Cal.Rptr. 341.

The court found that the lessor had not expressly waived his rights and had done nothing — other than the acceptance of the late rent — upon which an estoppel could be asserted.

Similarly, in the instant case, the appellant/lessor did not expressly waive any of his rights, and the only substantial evidence of implied waiver was his acceptance of late rental payments, and acceptance of improvements to the condominium unit — actions which were not inconsistent with the language of paragraph 15 of the contract. That language is arguably broader in its effect than the language provided in paragraph 27 of the lease involved in Karbelnig, as the former applies to the non-forfeiture of "any rights" — not just the acceptance of untimely rent.

To conclude, because Philpot acted consistently with paragraph 15 of the contract, he cannot be deemed to have waived the appellee's failure of performance. Therefore, Philpot was correct in his position that the conditions of the option to purchase had not been satisfied. Accordingly, the trial court should have granted Philpot's motion for directed verdict as he was not in breach of contract.

Because of our holding on the above point, appellant's third point concerning rejected jury instructions is now moot.

Reversed and remanded for further consistent proceedings.

McCORD and SHAW, JJ., concur.