Daily Development for
Thursday, September 14, 2000
By: Patrick A. Randolph,
Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu
LANDLORD/ TENANT; RENEWAL:
Equitable doctrine of "unclean
hands" may bar resort to otherwise available equitable rights to invoke
untimely exercise of renewal option.
JGT Corp. v. Andrews, 2000
WL 546347, No. M199901395COAR3CV (Tenn. Ct. App., May 5, 2000)
JGT, Lessee, entered into
a lease with Lessors. JGT improved the property and began business operations. The
lease provided for a sevenyear term, and JGT held an option to renew. In order
to exercise that option, JGT had to provide written notice at least six months
prior to the lease's expiration.
When the lease expired and
the Lessors refused to allow renewal, JGT brought suit alleging that it
provided written notice before the last six months of the lease. Lessors
claimed that no such notice was given, and that JGT fabricated the alleged
notice. As an alternate ground for its case, JGT asserted that the equitable doctrine
of "special circumstances" should allow it to renew the lease outside
the lease's original terms. As can be determined from the opinion, this appears
to be an equitable doctrine allowing a waiver of the time restrictions imposed
by the lease when there are certain "special circumstances." In this
case it was argued that it would only be fair to disregard the time
restrictions.
The Lessors asserted that
because the letter was fabricated, JGT was guilty of "unclean hands"
which serves to block JGT from asserting "special circumstances."
At trial, cross motions
for summary judgment were filed by both parties. The court held that JGT had
not fabricated the letter and could renew the lease under the doctrine of
"special circumstances" regardless of whether notice was timely.
On appeal, the court
reversed the decision. First, there was sufficient evidence to raise a genuine
issue of material fact as to whether the letter was fabricated to defeat the
plaintiff's motion for summary judgment. The court went on to note that if it
was determined at trial that the letter had been fabricated, the doctrine of
"unclean hands" would apply. That doctrine stops any action in equity
"at the steps of the courthouse." Farmers & Merchants Bank v.
Templeton, 646 S.W.2d 920, 924 (Tenn. Ct. App. 1982). The only requirement is
that the misconduct of the plaintiff be connected to the matter litigated. Chappell
v. Dawson, 308 S.W.2d 420, 421 (Tenn. 1957).
If the letter was
fabricated, JGT's misconduct was certainly connected to the matter litigated. Under
these circumstances, JGT would lose on both its claims. Thus, the court
overturned the summary judgment and remanded the case back for a trial to determine
whether the letter was fabricated and whether timely notice had been given.
Reporter's Comments: It
would seem highly unusual to allow the waiver of time restrictions imposed by a
lease, even with existing "special circumstances." Perhaps the
willingness to find "unclean hands" was a way for this court to get
around this unique doctrine.
Editor's Comments: In fact, although the jurisdictions are
split, a number of jurisdictions do permit tenants with good equitable arguments
to escape the consequences of an untimely exercise of a renewal option. Although
flatly declaring that "special circumstances" exist may be going a
little far, there are cases of estoppel and waiver. But a lawyer advising a client may want to take care to warn the
client that these options can be frustrated by conduct that "pushes the
equitable envelope," such as a little creative forgery. Thanks to Howard Smith of the St. Louis Bar, who
first reported this case in a recent edition of the ABA Commercial Leasing
Section Newsletter.)
Readers are urged to respond, comment, and argue with the daily
development or the editor's comments about it.
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