J.M. GEBAUER, INC., and KEPAOA DEVELOPMENT CORPORATION, Plaintiffs,
AMERICAN SAMOA POWER AUTHORITY, Defendant.
High Court of American Samoa
When lessor’s conditional notice of default unambiguously provides definite
date of termination, it can function as termination of lease if its terms are
not met. However, notice merely expressing
conditional retaking of leased premises upon failure to cure default can be too
indeterminate to convey intent to terminate lease.
When lessor’s notice of default in rent payments demanded that defendant cure
default and set specific date for beginning of eviction proceedings but did not
set specific date for termination of lease, notice conveyed intent to continue
with terms of lease rather than intent to terminate lease. As notice of default did not terminate lease,
defendant’s relinquishment of premises constituted abandonment of lease.
Unless otherwise agreed, upon abandonment of lease, lessor may (a) accept
lessee’s offer of surrender and terminate lease or (b) attempt to mitigate loss
of rents by leasing premises to another lessee. If lease is terminated, lessee is liable for
rent accrued before acceptance of surrender and for damage caused by
abandonment. If premises are leased to
another party, original lessee is liable only for difference between promised
rent and rents obtained.
 Whether lessor’s reentry onto
premises constitutes acceptance of surrender is question of fact.
 Considering notice of default, when lessors reentered for
their own purposes, they in effect accepted surrender of premises.
beginning of lease, lessee openly used area beyond leased premises. Use was so
obvious and extended in time that lessors impliedly gave permission for use and
could not recover rent for extra space.
 Object is
fixture if it is treated as part of premises, which may not be removed except
by owner of property.
Improvements made on real estate without direct consent of owner of land become
part of realty. Unauthorized removal or
destruction of improvement is act of waste.
 Person who
makes improvements on land in good-faith belief that owner authorized him to
build improvements is entitled to compensation for their value.
will not allow landowner to be unjustly enriched by taking improvements that
tenant constructed on land.
 By not
completely removing improvements, leaving premises in disheveled state and less
valuable than when it was leased, defendant committed waste maliciously and is
liable for compensatory and exemplary damages.
 When rent
is fixed at definite sum, recovery for failure to pay rent is that sum plus
interest and costs of suit, less any duty to mitigate.
for lessee’s waste can be measured by (a) diminution in value of property
resulting from waste or (b) cost of repairing or restoring property to its former
condition. Since there is no universal
test for determining which measure of damages to apply, method must be decided
on facts of each case.
 Although lessee’s improvements were made at its expense under lease
provision, lessee is not entitled to recover on claim of improving premises due
to circumstances of lease termination.
Before RICHMOND, Associate Justice, and LOGOAI, Chief Associate Judge.
For Plaintiffs, Katopau T. Ainu`u
For Defendant, Roy J.D. Hall, Jr.
On November 21, 2000, plaintiffs J.M. Gebauer, Inc.,
(“JMG”) and Kepaoa Development Corporation (“Kepaoa”) filed this action against
defendant American Samoa Power Authority (“ASPA”) to recover damages for breach
of a lease agreement between JMG and ASPA, unauthorized use of unleased
adjacent area, and injuries to the leased premises. On December 27, 2000, ASPA
filed its answer and counterclaim against JMG and Kepaoa to recover unpaid
utility charges and the value of improvements made to the leased premises. Trial took place on July 12, 2001. Both counsel were present.
the written instrument dated November 5, 1997, JMG leased to ASPA the building
in Nu`uuli, American Samoa, commonly referred to as the “Aiga Basket” (“the
premises”), for a term of 20 years commencing on November 1, 1997, with a
renewal provision of another 20 years.
On or about January 27, 2000, Kepaoa assumed from JMG the lessor’s
rights and obligations under the lease.
ASPA issued checks to either JMG or both JMG and Kepaoa to pay the rent
until September 2000 when it completely stopped paying rent.
a letter dated October l8, 2000, Kepaoa notified ASPA of the default in rent
payments and demanded the problem be remedied within 30 days. ASPA, from the
beginning of the lease, also used approximately 272 square feet beyond the
leased premises, without paying rent for this extra space. In the October 18 letter, Kepaoa also
notified ASPA that it had 30 days to remedy the lost rent for this extra space.
responding to the letter and without written notice, ASPA quit the premises
around November 14, 2000. In the course
of moving, ASPA caused substantial structural damage to the premises, which JMG
and Kepaoa repaired at their own expense.
ASPA acted deliberately and maliciously in causing this damage.
default clause in the lease of the premises provides JMG and Kepaoa with two
options upon ASPA’s default: (1) retake possession of the premises after a 10-
or 30-day notice of default or (2) require that ASPA cure the lease
default. Under either option, JMG and
Kepaoa retain the right to charge ASPA for associated costs or damages.
The lease uses language of reentry rather than termination to effect
cancellation of the lease. The only condition
to reentry is that the lessee be given 10 days’ notice in the case of financial
default or 30 days’ notice in the case of other default. Where a lessor’s conditional notice is
unambiguously conveyed, providing a definitive date of termination, it can
function as a termination of the lease if its terms are not met. Hodel
Co. v. Sutherland, 415
N.E.2d 517, 521 (Ill. 1981). A notice
merely expressing a conditional retaking of leased premises upon failure to
cure a default can be too indeterminative to convey intent to terminate a
lease. See Kaplan v. McCabe, 532 So. 2d 1354, 1357 (Fla. 1988)
(conditional notice to pay rent or quit premises raises presumption landlord
intends for tenant to remain under terms of lease); Ostlund v. Hendricks,
615 P.2d 327, 330 (Or. 1980).
 The question, then, is
whether the October 18th letter, of itself or in conjunction with later
actions, conveyed an intent to exercise the right to reenter. The determination relies in part on the
specific language of the letter. The
letter establishes a condition precedent—eviction proceedings will not be
instituted until default continues for another 30 days. While a specific date is set for the
beginning of proceedings, no specific date for termination is set—there is no
unambiguous date by which ASPA must quit the premises. If JMG and Kepaoa intended the October 18th
letter to terminate the lease, the letter would have provided a definitive date
for termination, rather than the ambiguous threat of beginning proceedings. The
letter conveys an intent to continue with the terms of the lease and a demand
for ASPA to cure payment according to those terms, rather than an intent to
terminate the lease. See Kaplan, 532 So. 2d at
As the letter alone did not terminate
the lease, ASPA’s relinquishment of the premises constitutes an abandonment of
the lease. See 49 Am. Jur. 2d
Landlord and Tenant § 250 (1995) (“Abandonment generally occurs when the
lessee leaves the rented premises vacant with the clear intention not to pay
rent or to be bound by the lease.”).
ASPA’s conduct and letter of October 18, 2000, clearly indicate that it
was voluntarily vacating the premises with no intent to pay rent.
 Except to
the extent the parties agree otherwise, a lessor may, upon a lessee’s
abandonment, (1) accept the lessee’s offer of surrender and terminate the
lease, leaving lessee liable only for rent accrued before the acceptance and
damage caused by the abandonment or (2) attempt to lease the premises to
another lessee as a means of mitigating the loss of rents, in which case the
original lessee is liable for the difference between promised rent and rents
obtained. Restatement (Second) of Property §
12.1 (1977); Noce v. Stemen, 419 P.2d 450, 451 (N.M. 1966) (a lessor may
enter premises which have been abandoned for the purpose of making ordinary and
necessary repairs without affecting the lessee’s liability for future rent); Pague
v. Petroleum Prod., Inc., 461 P.2d 317, 320 (Wash. 1969) (a lessor
may re-enter abandoned premises to prepare them for a prospective lessee
without accepting the abandonment; the abandoning lessee remains responsible
 Whether a lessor’s reentry onto the premises constitutes
acceptance of surrender is a question of fact.
See Riggs v. Murdock, 458 P.2d 115, 118 (Ariz. Ct. App.
1969) (the trier of fact must “determine whether the dominion and control
exercised by the landlord was for the landlord’s own benefit or for the benefit
of and on behalf of the original tenant”).
Here, JMG and Kepaoa argue that when they reentered
the premises, they did so to prevent further damage to the building caused by
ASPA’s removal of fixtures, not with an intent to release ASPA from its lease
obligations. However, clearly the
efforts of JMG and Kepaoa were directed toward profits to be gained from new
lessees—not in protecting the relationship with ASPA.
 While preventing further
damage to the premises was certainly one motivating factor for the reentry by
JMG and Kepaoa, clearly they were acting for their own benefit as well. Taken in conjunction with the October 18th
letter, the reentry constituted a legal reentry and retaking of the
premises. Accordingly, once JMG and Kepaoa
reentered for their own purposes, they in effect accepted ASPA’s unambiguous
surrender of the premises.
C. The 272
ASPA asserts that JMG and Kepaoa had positively
granted permission to ASPA to use the extra 272 square feet without paying
extra rent, and that it was only when Ryanny Oebauer, representing JMG and
Kepaoa, and Gary Sword, representing ASPA, had a disagreement that JMG and
Kepaoa demanded rent.
 The use of the extra 272
square feet was quite difficult to miss, and occurred from the beginning of the
lease. Whether JMG and Kepaoa granted
permission to use this property or not, ASPA’s use was so obvious and extended
that JMG and Kepaoa at the very least impliedly gave permission for ASPA’s
use. JMG and Kepaoa did not demand
compensation for ASPA’s use until October 18, 2000—nearly three years after the
lease began. ASPA quit the premises
before 30 days had passed after this demand.
Because the use before October 18, 2000 was permissive, and no improper
use took place afterward, ASPA is not liable for any rent for use of the extra
272 square feet.
[7-9] The issue of ASPA’s
improvements and then removal of some improvements from the premises must be
assessed under the law of fixtures and improvements. An object is a fixture if it is treated as
part of the premises; it may not then be removed except by the owner of the
property. See 35 Am. Jur. 2d Fixtures § 2 (1995). Improvements made on real estate without the
direct consent of the owner of the land interest become a part of the
realty—rendering removal or destruction of the improvement an act of
waste. See 41 Am. Jur. 2d
Improvements § 3
(1995). A person who makes improvements
on the land in the good-faith belief that the owner authorized him to build the
improvements is entitled to compensation for their value. See
Leapagatele v. Nyel, 17
A.S.R.2d 201, 204 (1990) (no entitlement to compensation where no good-faith
belief landowner has given permission).
[10-11] Equity will not allow a
landowner to be unjustly enriched by taking improvements a tenant constructed
on his land. 41 Am. Jur. 2d Improvements § 3. However, ASPA did not attempt to take the
improvements in such a way that left the premises in their original state.
Rather, by taking apart but not completely removing the improvements, ASPA left
the premises in such a condition that JMG and Kepaoa by necessity had to expend
funds to make the premises rentable. JMG
and Kepaoa cannot be faulted for choosing to expend funds to replace the
removed fixtures rather than expending funds to tear down what was left. By
leaving the premises in a state more disheveled and less valuable than they had
found it, ASPA committed waste maliciously.
JMG and Kepaoa are therefore entitled to both compensatory and exemplary
 The acceptance by JMG and
Kepaoa of ASPA’s abandonment did not free ASPA from its obligations under the
lease up until that point. Where the amount of rent is fixed at a definite sum,
the recovery for failure to pay rents is that sum, plus interest and the costs
of the suit, less any duty to mitigate. See 49 Am.
Jur. 2d Landlord and Tenant § 791 (1995). ASPA
has a legal obligation to pay previously unpaid rents causing the original
default as well as rents between the October 18, 2000 letter and the reentry of
JMG and Kepaoa. However, ASPA has established
that it has paid the back rents through November of 2000, when reentry took
 The destruction ASPA caused
to the property upon its departure is compensable. A lessor’s recovery for a lessee’s waste can
be measured by the diminution in the value of the property resulting from the
waste. Johnson v. Nw. Acceptance Corp., 485 P.2d 12, 17 (Or.
l971); 49 Am. Jur. 2d Landlord
and Tenant § 847. Damages for a lessee’s waste are also
frequently measured by the cost of repairing or restoring the property to its
former condition. Johnson, 485
P.2d at 17. There is no universal test
for determining which measure of damages to apply—the method must be decided on
the facts of each case. Id. (where
injury is easily repairable, cost of repair is the preferred amount). JMG and Kepaoa have already made efforts to
put the premises back in its original condition. Calculating the approximate value of the
property would involve another complex factual determination which we will not
undertake. Thus, we will use the
cost-to-repair theory of damages. JMG
and Kepaoa have established an estimate for these repairs at $21,626.26. This amount is an appropriate measure of
their compensatory damages caused by ASPA.
In addition, ASPA will be assessed $5,000.00 in exemplary damages.
 ASPA counterclaims for
unpaid electrical and water service and reimbursement for alleged improvements
to the premises. ASPA has established
the unpaid electrical and water charges at $25,000. However, ASPA’s expenditures on improvements
were made at its expense, under the provision in the lease for remodeling or
making structural improvements, and it is therefore not entitled to recover on
its claim of improving the premises in the amount of $50,000, or any other
amount, upon the circumstances of the lease termination. Rather, as discussed above, ASPA maliciously
caused and is responsible for the damage to the premises which JMG and Kepaoa
had to repair at their own expense.
We award JMG and Kepaoa $21,626.26 in compensatory
damages and $5,000.00 in exemplary damages, a total of $26,626.26, and ASPA
$25,000 in relief. Accordingly, ASPA
shall pay JMG and Kepaoa the net sum of $l,626.26, plus post-judgment interest
on this amount at the rate of 6% per annum.
The parties shall bear their respective costs of suit and attorney’s
fees, under the circumstances of this case.
It is so