CMI Food Service, Inc. v. Hatridge Leasing

• Decision Date: 17 January 1995
• Docket Number: No. WD,WD
• Citation: 890 S.W.2d 420
• Parties: CMI FOOD SERVICE, INC. and Marlowe King, Appellants, v. HATRIDGE LEASING, doing business as Missouri Zipps, Inc., doing business as Columbia Snapps, Inc., and doing business as Rally's, and Terry Hatridge and Laverne Hatridge, Respondents. 48855.
• Court: Missouri Court of Appeals

Page 420

890 S.W.2d 420

CMI FOOD SERVICE, INC. and Marlowe King, Appellants, v.HATRIDGE LEASING, doing business as Missouri Zipps, Inc. doing business as Columbia Snapps, Inc., and doing business as Rally's, and Terry Hatridge and Laverne Hatridge, Respondents.

No. WD 48855.

Missouri Court of Appeals Western District.

Jan. 17, 1995.

Randall Brown Johnston, Columbia, for appellants.

Hallie H. Gibbs, Jefferson City, for respondents.

Before SPINDEN, P.J., and LOWENSTEIN and ELLIS, JJ.

SPINDEN, Presiding Judge.

CMI Food Service, Inc., leased land to Terry and LaVerne Hatridge for a "fast food" restaurant.The lease required the Hatridges to pay "either the minimum rent or percentage rent, whichever is greater."CMI contends that this provision was a mistake.The parties had agreed before signing the lease, CMI contends, that the rent would be a minimum rent plus a percentage of sales.CMI asked the trial court to reform the lease to conform to this prior agreement, but the trial court refused.CMI appeals, and we affirm.

On April 10, 1987, CMI and the Hatridges, doing business as Hatridge Leasing, executed a 20-year lease of land at 815 Business Loop 70 East in Columbia beginning on July 1, 1987.The lease required the Hatridges to build a restaurant on the land and to pay all expenses associated with building construction.At the end of the lease term or upon termination of the lease, the building was to become CMI's property.

The lease set minimum rent at $18,000 for years one through four; $25,000 for years five through nine; and $30,000 for years 10 through 20.It also established a method for calculating a percentage rent: five percent of all net sales between $400,000 and $600,000; plus four percent of all net sales between $600,000 and $800,000; plus three percent of all net sales between $800,000 and $1 million; plus two percent of all net sales exceeding $1 million.The lease required the Hatridges to pay CMI "either the minimum rent or percentage rent, whichever is greater."

No one testifying at trial could remember who prepared the lease.CMI's former attorney, Jean Goldstein, did not prepare it, and she did not review it before the parties signed it.Goldstein had prepared drafts of the lease for CMI.None of the drafts were executed, and their terms differed from the executed lease.The drafts provided for variable rental amounts.

William Bratrud, CMI's stockholder and president, read the lease before signing it for CMI.He did not comment at that time about the rent terms.He had more than 15 years' experience in commercial leasing and more than 30 years' experience in restaurant and commercial management.Michael Bratrud also read the lease, and he did not make any objections to its terms.He had experience with leases involving other Columbia area restaurants.

Before signing the lease, the Hatridges read the lease.They believed that it required them to pay either the minimum rent, or a percentage of sales, whichever was greater.

From the beginning, however, the Hatridges did not calculate correct rent payments.They paid: $18,000 minimum rent plus five percent of $1 to $600,000 in net sales; plus four percent of $600,000 to $800,000 in net sales; plus three percent of net sales over $800,000.Their rent payments totalled $40,059 in 1987; $44,132 in 1988; $40,928 in 1989; $39,189 in 1991; $38,877 in 1992; and $22,467 from July 1992 to January 1993.Although the lease increased the minimum rent from $18,000 to $25,000 in August 1991, the Hatridges continued to pay a minimum of $18,000.

In November 1992, Michael Bratrud advised the Hatridges' office manager that the Hatridges had been calculating the rent incorrectly.Terry Hatridge reviewed the rent payments and the lease and concluded that they had paid approximately $95,000 more than they owed by paying both the minimum and a percentage of sales.

The lease said, "In the event the amount of rent for said year actually paid by Lessee exceeds the percentage set out in ... this Article as computed on a twelve month basis, then such excess rental payments shall be credited by Lessor to Lessee upon the next installment or installments of monthly rental due under the Lease."The Hatridges demanded a refund on the basis of this provision.CMI did not comply, so the Hatridges quit paying rent in January 1993.

CMI and Marlowe King¹ sued the Hatridges.They asked the court: (1) for rent and possession based upon the terms of the lease; (2) for a declaratory judgment to construe the lease terms, and (3) to reform the lease to reflect a minimum rent plus percentage rent.The Hatridges countersued.They sought a rent refund or credits and damages for unjust enrichment.The trial court entered a judgment ordering that the Hatridges retain possession and pay either the minimum rent or percentage of sales rent, whichever was greater.The trial court also awarded the Hatridges $88,543 in damages to be applied against future rent obligations.CMI appeals.

In its first point relied on, CMI contends that the trial court erred in concluding that it could not consider parol evidence.CMI argues that the court erred because it relied on Dehner Urban Redevelopment Corporation--St. Louis v. Dun & Bradstreet, Inc., 567 S.W.2d 700(Mo.App.1978).The Dehner court held that parol evidence may not be considered in showing the intent of the parties where the contract term is unambiguous.Id. at 704.CMI argues that Dehner misconstrues the Missouri law.We agree, but we do not understand how the trial court's reliance on Dehner prejudiced CMI.

Longstanding precedent provides that parol evidence is admissible to establish a claim for reformation of a written instrument.State ex rel. State Highway Commission v. Schwabe, 335 S.W.2d 15, 19(Mo.1960);Walters v. Tucker, 308 S.W.2d 673, 675(Mo.1957).A written instrument may be reformed because of a scrivener's mistake which does not incorporate the parties' true intentions.Duenke v. Brummett, 801 S.W.2d 759, 765(Mo.App.1991);Edwards v. Zahner, 395 S.W.2d 185, 189(Mo.1965)."However, a mistake affording ground for the relief of reformation must be mutual and common to both parties to the instrument.It must appear that both have done what neither intended."Walters, 308 S.W.2d at 675.

"Where the evidence supports reformation, the remedy is not barred by the fact that the instrument sought to be reformed is unambiguous."Duenke, 801 S.W.2d at 765.The court in Duenke criticized Dehner: "To the extent ... that Dehner appears to hold that an unambiguous writing may not be reformed, it is inconsistent with the Missouri cases and other authorities ... which are to the effect that lack of ambiguity does not preclude reformation."Id. at 768.Duenke allows parol evidence in cases in which the writer of a contract makes a mistake and the contract needs to be reformed.

We agree with CMI that the trial court erred when it said:

The conduct of the parties may not be considered for purposes of determining the intent of the parties to the lease agreement where the agreement's clause in question is not...