Fudge v. United Urban Indian Council, Inc.

BRIGHTMIRE, Chief Judge. The ultimate question in this commercial lease dispute is whether there was an executed oral modification of a lease agreement after the tenant relinquished a portion of the leased premises. The trial court held there was not, awarded the landlord damages for breach of the original lease and denied the tenant’s counterclaim for overpaid rent. We hold, however, there was a modification of the lease and reverse. I In May 1984 the defendant tenant, United Urban Indian Council, Inc., a vocational training program funded through the U.S. Department of Labor, negotiated for the leasing of two offices from the landlord Fudge Enterprises. The landlord proposed that the lease term run from July 1, 1984, through June 1987, and that it include a monthly rental of $1,740 based upon the square footage leased, with the first and last month’s rent paid in advance. Because of its biennial funding cycle, however, the tenant objected to the three-year lease term, and informed the landlord’s co-owner that it was not assured of adequate revenue to lease the entire space for more than two years. The landlord’s negotiating co-owner is said to have responded to this by [269] telling the tenant’s director that there would be “no problem.” In 1986 funding for the Council was reduced and it was forced to relinquish the smaller of the rented offices. The landlord’s co-owner was informed of the problem and both parties then tried unsuccessfully to find a new tenant for the unused space. The landlord’s negotiator offered to release the tenant from any liability for the empty space in exchange for the tenant’s agreement to lease the occupied space for an additional three years — a proposal which was never accepted. Instead, in July 1986, the tenant began paying $1,160 a month for the space it actually occupied. At the same time the landlord began sending the tenant monthly statements which requested the reduced rental payment and then accepted such payment without objection. This course of conduct continued during the final year of the lease term until April 1987. At that time the tenant gave the landlord written notice that it would be vacating the premises, and attached a check for $2,320 — the April and May rent — which, together with the prepaid June rental, paid the rent to the end of the lease. Nevertheless, on June 5, 1987, the landlord filed this action seeking $6,380 — the amount it claims the tenant underpaid during the last eleven months of the lease. The tenant answered on July 27, 1987, and counterclaimed for $580 which it said was an overpayment based on the difference between “the last month’s rental paid in advance ... and the actual monthly rental under the modification of the lease agreement.” The trial court found for the landlord on both its claim and the tenant’s counterclaim and entered judgment accordingly. The Council appeals. II The tenant assigns as error the trial court’s failure to find that the original lease agreement of the parties had been modified by an executed oral agreement and the conduct of the parties. The argument is that the executed reduction of rent, coupled with the the landlord’s acceptance of that amount for eleven months without objection, constitutes an executed oral modification of the original lease agreement. The landlord contends, on the other hand, that its attempts to mitigate its damages by re-leasing the space, coupled with its proposed “addendum to the original agreement” clearly show that it was “not the intent of [the landlord] to execute an oral modification of the original agreement.” The controlling law is found in 15 O.S. 1981 § 237, which states: “A contract in writing may be altered by a contract in writing, or by an executed oral agreement, and not otherwise.” 1 Thus the trial court correctly identified the issue to be resolved as “whether or not the [landlord] has acquiesced in a reduction of rent.” The trial court held that it had not. We disagree. Here, unlike in Carpenter v. Riddle,2 we are not dealing with an abandoned lease situation. The undisputed facts in this case are that the tenant did not abandon the lease but paid for as much space as it actually used with the implicit approval of [270] the lessor. Indeed, it can be said that the landlord agreed to a modification of the lease as manifested by the monthly statements it presented to the tenant together with the landlord’s acceptance of the tendered amount of rent without objection. Such affirmative acts clearly demonstrate the landlord’s joinder in executing a modification of the lease contract. Parenthetically, we note that even if one were to characterize the tenant’s relinquishment as an abandonment, the landlord still could not prevail since it accepted the partial surrender in order to keep the Council as a tenant for the rest of the leasehold estate. Ill Under such circumstances we hold that the appealed judgment is erroneous as a matter of law. It is therefore vacated and the cause is remanded with directions to enter judgment for the tenant on both the landlord’s claim and the tenant’s counterclaim. REIF, P.J., concurs. MEANS, J., dissents. Footnotes [1] Emphasis added. [2] 527 P.2d 592 (Okl. 1974). At first blush the decisional rule of law stated in Carpenter appears to support the landlord. It is summarized as follows: "[I]f a tenant wrongfully abandons leased premises before the expiration of the term, the landlord, at his election, may: (1) terminate the lease contract, enter and take possession recovering accrued rents to the date of entry, or (2) do nothing to terminate the lease or disturb possible possession and sue at the appropriate time for the entire term, or (3) give notice to defaulting tenant of his refusal to accept the surrender ... and sublet the premises for the benefit of the tenant to mitigate his damages.” This statement of the law applied to both commercial and residential lease contracts until 1978 when the Oklahoma Residential Landlord and Tenant Act, 41 O.S.Supp.1990 §§ 101 through 136 was enacted. The second option was extinguished with regard to residential lease abandonment disputes in 1978 by the enactment of 41 O.S.1981 § 129(B).