American Nat. Ins. Co. v. Noble Communications Co., Inc.

• Decision Date: 01 November 1996
• Docket Number: No. 20555,20555
• Citation: 936 S.W.2d 124
• Parties: AMERICAN NATIONAL INSURANCE CO., Respondent, v. NOBLE COMMUNICATIONS CO., INC., Appellant.
• Court: Missouri Court of Appeals

Page 124

936 S.W.2d 124

AMERICAN NATIONAL INSURANCE CO., Respondent, v. NOBLE COMMUNICATIONS CO., INC., Appellant.

No. 20555.

Missouri Court of Appeals,

Southern District,

Division Two.

Nov. 1, 1996.

Richard E. Dorr, Timothy M. McDuffey, Dorr, Baird & Lightner, P.C., Springfield, for appellant.

Frank M. Evans, III, M. Scott Montgomery, Miller & Sanford, Springfield, for respondent.

PARRISH, Judge.

Noble Communications Co., Inc., (Lessee) appeals a judgment awarding damages to American National Insurance Co. (Lessor) for Lessee's breach of provisions of a lease agreement and denying Lessee's counterclaim for fraudulent misrepresentation.

Lessor brought an action to recover rent in accordance with a holdover provision in a lease (Count I), damages for unlawful detainer (Count II), cleaning expenses and damages to the leased premises (Count III) and attorney fees (Count IV). Lessee counterclaimed requesting damages for fraudulent misrepresentation. The trial court awarded summary judgment to Lessor on Count I and dismissed Count II. Following trial, the trial court found in favor of Lessee on Count III; in favor of Lessor on Count IV; and in favor of Lessor on Lessee's counterclaim. This court affirms the judgment as hereafter modified with respect to attorney fees, and remands. ¹

Lessor owns commercial rental property in Springfield, Missouri, known as Corporate Centre. On June 1, 1988, Lessor and Lessee entered into a lease agreement whereby Lessee would occupy a portion of Corporate Centre. The lease was for a six-year term, expiring July 31, 1994. It covered approximately 37,000 square feet of Corporate Centre.

In early 1993 Lessee's representative, Michael Cooper, ² and Tom McLoud, the manager and leasing agent of Corporate Centre, discussed an extension of the lease. McLoud submitted two written proposals, one in a letter dated January 18, 1993, and one in a letter dated January 29, 1993, for a ten-year extension. Those letters were followed by one dated March 3, 1993, in which McLoud acknowledged that Lessee was considering alternatives to a ten-year extension of its Corporate Centre lease. McLoud's letter advised Cooper he had inquired about Lessor's interest in granting Lessee a short-term extension; that Lessor's position was "that no leases be extended for less than a period of three years."

On June 16, 1993, Cooper wrote McLoud. He thanked McLoud for his patience in awaiting a response to the previous proposal and stated that Lessee had postponed its building plans and wanted to negotiate a workable solution to its space needs with Lessor. Lessee proposed a one-year extension with options for two additional one-year extensions and two additional five-year extensions.

McLoud replied by letter dated June 21, 1993. He acknowledged receipt of Lessee's June 16 proposal and advised Cooper that Lessor did not find it acceptable. McLoud again advised Cooper that Lessor did not desire granting an extension of the lease for a period less than three years.

There were no further negotiations between the parties until the following year. Mr. Cooper explained that there was "a down time" from June 1993 until early 1994. He testified, "We were looking at other options. We were looking at what we could do, but there were no negotiations between American National and Noble."

Cooper sent a letter to McLoud dated March 4, 1994. It stated that Lessee was not interested in extending its "commitment in Corporate Centre" for an additional three years, suggesting that a lease be negotiated "for a shorter period of time." The March 4 letter proposed terms for "[a] one (1) year or eighteen (18) month lease" with options for additional extensions. The letter concluded, "We would be interested in reducing our space by about 5,000 square feet to allow you the opportunity to lease at a higher rate to a smaller tenant."

McLoud responded by letter dated March 14, 1994, and a proposed "Amendment to Lease." The letter was addressed to Cooper as Chief Financial Officer of Lessee. It explained:

Pursuant to our recent phone conversations and your letter, please find enclosed four copies of an Amendment to Lease setting forth the fact that you will extend your lease for a period of 18 months at a rate which you suggested in your letter.

Please note that American National is not willing to take back 5,000 feet this time nor enter into any option agreements, but simply an 18 month extension.

. . . . .

Although the executive committee has not approved the lease, the real estate manager is willing to recommend this to them and will need signed copies of the amendment to take before the committee. If you will please have all four copies of the Amendment to Lease signed and returned to me, I will get them to Galveston for consideration.

Cooper responded to the March 14 correspondence and the proposed Amendment to Lease by letter to McLoud dated March 25, 1994, stating:

The term of 18 months and the rate are acceptable. However, we are strong in our position of having you take back 5,000 square feet of space. Our departments have been consolidated and therefore now, and will in the future, require less space.

Tom, please let me know if this is acceptable.

McLoud replied by letter dated March 30, 1994. He advised Cooper that he had reviewed Cooper's response with Lessor; that since the proposed extension was for a short term with no increase in rent, Lessor was "unwilling to take back any square footage." The March 30 letter stated, "[Lessor] would be most happy to work with you on this arrangement if there were a longer term commitment on your company's behalf."

Cooper and McLoud had additional telephone conversations after Cooper received the March 30 letter. Their discussions included the possibility of having a longer term lease together with a 5,000 square foot reduction in space. Cooper was asked at trial, "When you prioritized what your priorities were on a new lease, what was the most important thing to you?" He answered, "We really wanted space taken back. Our business had changed dramatically. We had consolidated some departments, and we wanted some space taken back."

McLoud followed up his conversations with a letter to Cooper dated April 25, 1994. It stated:

Please be advised that in my most recent conversations with American National, they will agree to allow you to reduce your space by approximately 4-5,000 square feet. Under the following terms and conditions:

1. The size and location of the space to be mutually agreed upon.

2. You extend the term of your lease for a period of three (3) years.

3. The rental rate for the remaining square footage will be $13.94 per square foot as stipulated in the amendment dated March 14, 1994.

. . . . .

If you find this acceptable, please let me know as soon as possible, as American National is getting very anxious to get your lease extended or see what we can do in terms of finding alternate tenants.

Shortly after receiving the April 25 letter--"probably within the next week"--Cooper delivered the four copies of the proposed lease dated March 14, 1994, that provided for an eighteen-month extension, signed by him on behalf of Lessee, to McLoud's office. He received a letter dated June 3, 1994, from McLoud stating:

Since I have been unable to catch you by telephone, I thought I would let you know that I have discussed the latest proposal that you forwarded me to extend your lease for a period of eighteen (18) months upon the same terms and conditions as your existing lease.

As you know, American National's position from the very beginning has been that they wanted a three (3) year lease term, and have accordingly denied the eighteen (18) month lease extension. They have asked that I sit down with you and see what we can resolve on a three (3) year extension. In light of the fact that your lease expires on August 1, 1994, we need to do this as soon as you have time.

After receiving the June 3 letter, Lessee searched for other property to rent. Lessee also continued negotiations with Lessor.

Lessor's real estate manager, Scott F. Brast, notified Cooper by letter dated June 22, 1994:

As you are aware, the lease term between Noble Communications and American National Insurance Company expires July 31, 1994. As you are also aware, there has been no agreement reached between Noble Communications and American National to either extend the existing lease or to enter into a new lease.

Please be advised that in the event the lease term expires without a written agreement being signed on behalf of American National to either extend the existing lease or to enter into a new lease, it is the intention of American National to enforce the terms of the existing lease. This will include but not be limited to collection of rent at 200% of the Base Rent under the existing lease during any holdover period.

As you have been advised, American National is not willing to consider any extension of the existing lease for a term that is shorter than three years. I will look forward to hearing from you in this regard at your earliest convenience.

The June 22 letter from Lessor's real estate manager shows copies sent to McLoud and to Lessee's attorney.

Lessee's attorney then wrote to Lessor's real estate manager. The letter was dated June 30, 1996. It stated Lessee's understanding to be that Lessee had "accepted the 18 month lease extension that was negotiated and prepared by [Lessor's] local managing agent Tom McLoud." Lessee's attorney requested that Lessor "confirm this extension." The letter added, "If for any reason you are denying this extension, please advise me immediately of your reasons for doing so."

Lessor's attorney replied by letter dated July 8, 1994. The reply stated that Lessee's June 30 letter had been received by Lessor's real estate manager July 5, 1994. It gave the following response to the inquiries made by that letter:

There has been no agreement entered into between...