Santa Fe Trail Neighborhood v. W.F. Coehn

• Decision Date: 25 January 2005
• Docket Number: No. WD 63699.,WD 63699.
• Citation: 154 S.W.3d 432
• Parties: SANTA FE TRAIL NEIGHBORHOOD REDEVELOPMENT CORP., Plaintiff, Dr. Joan Walker, Respondent, v. W.F. COEN & COMPANY, et al., Defendant, Dr. Henrik A. Knudsen and Rogene F. Knudsen, Appellants.
• Court: Missouri Court of Appeals

154 S.W.3d 432

SANTA FE TRAIL NEIGHBORHOOD REDEVELOPMENT CORP., Plaintiff Dr. Joan Walker, Respondent, v. W.F. COEN & COMPANY, et al., Defendant Dr. Henrik A. Knudsen and Rogene F. Knudsen, Appellants.

No. WD 63699.

Missouri Court of Appeals, Western District.

January 25, 2005.

Rehearing Denied March 1, 2005.

Ralph E. Pratt, Independence, Mo, for appellants.

Michael W. Blanton, Lee's Summit, Mo, for respondent.

Before RONALD R. HOLLIGER, Presiding Judge, PATRICIA BRECKENRIDGE, Judge and JOSEPH M. ELLIS, Judge.

JOSEPH M. ELLIS, Judge.

Appellants, Dr. Henrik A. Knudsen and his wife Rogene F. Knudsen, appeal a judgment of the Circuit Court of Jackson County in their civil action for apportionment and distribution of an award of damages which was paid into the registry of the court after certain real property they owned was condemned. The Knudsens claim the trial court erred in distributing a part of the award to Respondent, Dr. Joan R. Walker, since Dr. Walker was not entitled to any distribution whatsoever. We reverse and remand for entry of a new judgment in favor of Dr. Walker.

The underlying facts of this case are undisputed. In 1965, the Knudsens purchased real estate located at 1520 South Noland Road in Independence, Jackson County, Missouri ("the Property"). The Property, on which a building had been constructed, was used as a dental office beginning in 1967, and Dr. Knudsen practiced dentistry there until he retired in 2001. In 1977, the Knudsens built an addition onto the front of the building, connecting to the building's existing plumbing and electrical systems. The reception room for the dental offices in the building was located in the front of the building and was shared by everyone in the building. There was a parking lot in the rear of the building that was also shared by the occupants of the building, as well as by patients.

At some point prior to 1996, Appellants began renting space in the building to another dentist, Dr. Branstetter. At this time, Dr. Walker worked for Dr. Knudsen. Dr. Branstetter subsequently sold his dental practice to Dr. Walker, who, on November 15, 1996, entered into a written agreement with the Knudsens to occupy the office space that had formerly been occupied by Dr. Branstetter. Pursuant to the terms of the agreement, Dr. Walker took possession of her office space in the building on November 15, 1996.

The written agreement between the Knudsens and Dr. Walker ("the Agreement") was titled "PROFESSIONAL OFFICE LEASE AGREEMENT." It was signed by the Knudsens as "Landlords" and by Dr. Walker as "Tenant," and throughout the text of the Agreement, the Knudsens were referred to as "landlord" and Dr. Walker was referred to as "tenant." The Agreement provided that it was a contract to "lease" and "rent" office space in the building to Dr. Walker, who agreed to "accept the Leased Premises in [their] present condition and as suited for the uses intended by" her. That intended use was specified in the Agreement, which further provided that "[t]he Leased Premises shall be used for a professional office space."

The professional office space leased to Dr. Walker pursuant to the Agreement was described as "office space consisting of 1,164 square feet, more or less," and was further described as comprising "approximately 46.6% of the total leasable space within the office building." The diagrams attached to the Agreement indicate that the leased space included a common reception area and a common area in the basement that were to be shared by all occupants. The Agreement also provided that the Knudsens would maintain the building's rear parking lot, which Dr. Walker and her patients were permitted to use.

The Agreement expressly provided that "[t]his contract shall create the relationship of Landlord and Tenant between the parties thereto" and that "Landlord gives to Tenant exclusive control of the Leased Premises." In addition, the Agreement gave Dr. Walker the right to "assign this lease or sublease all or portions of the Leased Premises to others if such operation is within the purposes for which the Leased Premises may be used," as long as she obtained the prior written consent of the Knudsens, which was not to be unreasonably withheld.

The Agreement specified an initial lease term of five years at a basic monthly rental rate of $775 per month, and required Dr. Walker to pay a $775 security deposit for the leased space.¹ The term of the Agreement as initially executed was from November 15, 1996, to November 14, 2001. The Agreement also specified that Dr. Walker had the option to renew the lease for an additional five-year term upon giving written notice to the Knudsens of her intent to do so at any time prior to three months before the end of the original term of the lease. If renewed, the basic monthly rental rate, during each subsequent year following the end of the original five-year term of the Agreement, was to incrementally increase by an amount related to the increase in the Consumer Price Index (CPI) as computed and published by the United States Department of Labor Statistics for the area encompassing the Property.

On December 5, 2000, Dr. Walker's attorney sent a letter to the Knudsens via certified mail giving them timely notice of Dr. Walker's desire and intent to renew the Agreement for a second five-year term. On June 1, 2001, Dr. Knudsen retired and sold his dental practice to a third party, Dr. Rodger Suchman. Dr. Suchman wished to rent, as a month-to-month tenant only, the office space previously occupied by Dr. Knudsen in the building, and although this space was slightly larger than the space being rented to Dr. Walker, the rental fee was set at $775 per month, which, after the CPI adjustment provided for in the renewed Agreement between the Knudsens and Dr. Walker, was slightly less than the basic monthly rental rate then being paid by Dr. Walker for the office space she was occupying.

On August 30, 2001, a Petition for Condemnation was filed by the Santa Fe Trail Neighborhood Redevelopment Corporation ("Santa Fe") requesting, among other things, that all of the real property owned by the Knudsens which was situated in the Martha's Vineyard Subdivision be condemned as blighted and in need of redevelopment. This included not only the Property, but also an adjacent vacant lot owned by the Knudsens. On November 14, 2001, the trial court entered an order condemning both pieces of real estate.

On March 11, 2002, pursuant to a stipulation between the Knudsens and Santa Fe, the trial court entered a consent judgment reflecting that the Knudsens had agreed to accept the sum of $275,000 in full satisfaction and release of their claim for damages arising from Santa Fe's condemnation of the Martha's Vineyard Subdivision real estate owned by the Knudsens. Santa Fe was ordered to pay $275,000 into the court registry as damages for the takings by Santa Fe, and the trial court also ordered Santa Fe to pay "reasonable tenant moving expenses."

On March 21, 2002, Santa Fe deposited $275,000 into the court registry. Although the November 14, 2001 order of condemnation expressly granted Santa Fe the right to take possession of the condemned real estate at that time, Santa Fe did not exercise this right. Instead, Dr. Walker continued in uninterrupted possession and control of her office space in the building on the Property until she vacated the premises on December 31, 2002.

As authorized by § 523.053.1,² on March 25, 2002, the Knudsens filed a motion requesting that the condemnation damage award be apportioned to reflect the respective legal interests of both themselves and Dr. Walker in the Property, a copy of which they served on Dr. Walker. Although this motion described Dr. Walker as a "tenant" of the Property who was "entitled to [receive] moving expenses" from Santa Fe under the terms of the March 11, 2001 consent judgment and acknowledged that Dr. Walker claimed a leasehold interest in the Property pursuant to the Agreement, the motion further requested an order commanding the court clerk to disburse to the Knudsens all of the $275,000 being held in the court registry.

On March 28, 2002, Dr. Walker filed a response to the Knudsens' motion in which she claimed a bonus value leasehold interest in the condemnation proceeds pursuant to the renewed Agreement and requested that the trial court retain the proceeds in the registry "until such time as the Court can determine the interest of the various claimants to this sum." On April 28, 2003, the trial court entered an order of partial distribution in which it directed, in accordance with a stipulation between the parties, that the sum of $225,000 be paid to the Knudsens out of the registry and that the remaining $50,000, which was still the subject of a dispute between the Knudsens and Dr. Walker, be placed in an interest-bearing bank account until further order of the court.

In November 2003, the trial court held a hearing on the Knudsens' motion for apportionment and distribution and received evidence presented by the Knudsens and Dr. Walker. Dr. Walker presented the testimony of an expert real estate appraiser, William Davis, while the Knudsens also presented the competing testimony of another expert real estate appraiser, Larry Witt. After considering this and other evidence, on December 12, 2003, the trial court entered a judgment finding that with regard to the Property in question, Dr. Walker's proportionate share of the condemnation damages that had been paid into the registry by Santa Fe was $47,000. On January 12, 2004, the trial court issued an amended judgment finding that Dr. Walker was also entitled to recover the interest that had accrued on her $47,000 proportionate share, leading to the instant appeal.

The familiar standard set forth in Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976), governs appellate review of a trial court's order or judgment apportioning, pursuant to § 523.053...