Cardinal Partners v. Desco Investment Co.

• Decision Date: 19 January 2010
• Docket Number: No. ED 92842.,ED 92842.
• Court: Missouri Court of Appeals
• Parties: CARDINAL PARTNERS, LLC, Appellant, v. DESCO INVESTMENT COMPANY, L.L.C., Respondent.

301 S.W.3d 104

CARDINAL PARTNERS, LLC, Appellant, v. DESCO INVESTMENT COMPANY, L.L.C., Respondent.

No. ED 92842.

Missouri Court of Appeals, Eastern District, Division Three.

January 19, 2010.

Noel A. Sevastianos, St. Louis, MO, for appellant.

Edward L. Dowd, Jr., Robert F. Epperson, Jr., St. Louis, MO, for respondent.

LAWRENCE E. MOONEY, Judge.

Cardinal Partners, LLC presently owns the Chariton Square Shopping Center in the City of St. Louis (the property). Desco Investment Company, L.L.C. originally owned the property and inserted a restrictive covenant governing the property's use when it transferred the property. The present owner filed a declaratory-judgment action against the original owner, seeking a declaration that the restrictive covenant the original owner inserted in a special warranty deed is invalid as a matter of law, and therefore, unenforceable. The original owner responded, maintaining that the covenant was enforceable, or in the alternative should be reformed. Each party filed a motion for summary judgment. The trial court granted the original owner's motion, reformed the restrictive covenant, and denied the present owner's motion. The present owner appeals the summary judgment entered by the Circuit Court of the City of St. Louis in favor of the original owner. We reverse and remand because the original owner has not established its entitlement to reformation of the restrictive covenant as a matter of law.

Factual and Procedural Background

The property contains a building where Schnuck Markets, Inc. operated a supermarket from 1968 to about 1991. No supermarket has operated on the property since the Schnucks store closed although two other Schnucks supermarkets currently operate within three miles of the property.

In 1999, the original owner entered an agreement to sell the property, and conveyed the property to Chariton Square Shopping Center, L.L.C. (the original buyer) via a special warranty deed. The deed, in conformance with the sales agreement for the property, contained a restrictive covenant, which provided that no full-line grocery store, supermarket, or drug store could operate on the property.¹ The original buyer conveyed the property to another purchaser in 2004, and the present owner then bought the property in 2005 with the restrictive covenant in place. Shortly thereafter, the present owner filed a declaratory-judgment action against the original owner, seeking a declaration that the restrictive covenant is invalid as a matter of law, and therefore, unenforceable.

The original owner maintained that the restrictive covenant was enforceable as drafted. As an alternative strategy, the original owner filed a second-amended counterclaim, averring that it was the intention of both the original owner and the original buyer to include in the special warranty deed a valid, reasonable, and fully enforceable restriction on the use of the property for the benefit of Schnuck Markets. In the event the court determined the restriction was unenforceable as drafted, the original owner sought reformation of the restrictive covenant. The original owner asked that language be added to provide that the restriction benefited Schnuck Markets, and to provide reasonable limitations on time and geographic area. Specifically, the original owner asked the trial court to reform the restrictive covenant to state that it was made for the benefit of Schnuck Markets, to limit its duration to 25 years, and to apply only so long as a Schnucks supermarket operates in Missouri within five miles of the property.

Each party filed a motion for summary judgment. In its motion, the original owner claimed that it and the original buyer understood the restrictive covenant was for Schnucks Markets' benefit. The original owner maintained that the restriction was reasonable and enforceable, but if the court were to find its terms unreasonable, then the original owner sought reformation as requested in its second-amended counterclaim. The original owner asserted that the court has the equitable power to reform the restrictive covenant as proposed, to render it reasonable or to correct a mutual mistake.

The original owner argued in support of its motion that if the court were to determine the restrictive covenant unenforceable as written, "then a mutual mistake clearly occurred between [the original owner] and the [original] buyer of the [p]roperty at the time they agreed to the Sale Agreement and Special Warranty Deed." The original owner pointed to the sales agreement as "conclusive evidence" of the intent of the original owner and the original buyer. It pointed to the sale of another shopping center by Schnuck Markets to the original buyer on the same day as "direct evidence" that the restriction's purpose was to benefit Schnuck Markets. The original owner, however, produced no affidavit, deposition testimony, or other evidence from the original buyer as to its intent regarding the restrictive covenant when it bought the property.² The original owner asserted that the evidence clearly demonstrated the basic assumption shared by the original owner and the original buyer to include a valid restriction on the property for the benefit of Schnuck Markets. Should the court deem the restriction too broad, the original owner argued, then the parties shared a misconception about the restriction's validity. Thus, the original owner asserted that reformation would be appropriate to address that misconception and to correct the restrictive covenant to properly reflect and effectuate the intent of the original owner and original buyer.

The trial court granted the original owner's motion. The court found reformation to be an appropriate remedy because the restriction was not limited with regard to duration or proximity to a Schnucks supermarket. The court found that "[b]oth parties to the original Special Warranty Deed clearly intended to create a restriction as to the use of the [p]roperty, they merely failed to include a reasonable limitation as to time and space." The trial court further elaborated that "[r]eformation would protect the essentials of the commercial planning and finance which the initial parties contemplated while preventing an admixture of prohibitions ad infinitum, the latter of which commonsense [sic] can demonstrate has a generally negative effect on free commerce." The court found equitable grounds to grant relief—although it did not identify the precise nature of those grounds—as well as the presence of mutual mistake. Consequently, the trial court reformed the restrictive covenant, limiting its application to 25 years and only for so long as a Schnucks supermarket operates in Missouri within five miles of the property.³ The trial court, however, determined that it would be presumptuous to order the restriction as made for the benefit of Schnuck Markets, especially when Schnuck Markets was not a party to the case. The trial court simultaneously denied the present owner's motion for summary judgment. The present owner appeals.

Discussion

In three points on appeal, the present owner claims that the trial court erred in granting the original owner's motion for summary judgment, that the lack of evidence regarding mutual mistake made the deed's reformation arbitrary, capricious, and unreasonable, and that the trial court erred in denying the present owner's motion for summary judgment.

Summary judgment allows a trial court to enter judgment for the moving party where the party demonstrates a right to judgment as a matter of law based on facts about which there is no genuine dispute. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Our review is essentially de novo. Id. When considering an appeal from summary judgment, we review the record in the light most favorable to the party against whom judgment was entered. Id. Thus, we afford the benefit of all reasonable inferences to the non-movant. Id.

The adage that we view the record "in the light most favorable to the non-movant" means that the movant bears the burden of establishing a right to judgment as a matter of law on the record as submitted. Id. at 382. Any evidence in the record that presents a genuine dispute as to the material facts defeats the movant's prima facie showing. Id. Similarly, the rule that we give the non-movant the benefit of all reasonable inferences means that if the movant requires an inference to establish the right to judgment as a matter of law, and the evidence reasonably supports any inference other than, or in addition to, the movant's inference, a genuine dispute exists, and the movant's prima facie showing fails. Id.

In its first point, the present owner claims the trial court erred in granting the original owner's motion for summary judgment because the original owner "utterly failed to establish the mutuality of several mistakes regarding the restrictive covenant." In its second point, the present owner claims the lack of evidence regarding mutual mistake makes any reformation of the deed arbitrary, capricious, and unreasonable because the record is replete with issues of genuine material fact. We consider these points together.

The original owner's second-amended counterclaim pleaded mutual mistake as the sole basis for reformation of the restrictive covenant. The original owner's summary-judgment motion, however, contended that the trial court had the power to reform the restriction based both upon its general equitable powers and upon mutual mistake. The original owner argued that the court's equitable power allowed it to reform the restrictive covenant to make it reasonable, and analogized and cited to cases where the courts reformed covenants not to compete.⁴

The original owner's argument regarding the court's general equitable power appears to rest on the abstract principle that equitable remedies are flexible and may be molded to meet the needs of justice....