Crestview Bowl, Inc. v. Womer Const. Co., Inc.

• Decision Date: 24 February 1979
• Docket Number: No. 49241,49241
• Citation: 225 Kan. 335,592 P.2d 74
• Parties: CRESTVIEW BOWL, INC., Appellee, v. WOMER CONSTRUCTION CO., INC., Appellant.
• Court: Kansas Supreme Court

Page 74

592 P.2d 74

225 Kan. 335

CRESTVIEW BOWL, INC., Appellee, v. WOMER CONSTRUCTION CO., INC., Appellant.

No. 49241.

Supreme Court of Kansas.

Feb. 24, 1979.

Syllabus by the Court

1. When a case is submitted to the trial court on an agreed stipulation of facts and documentary evidence, this court is afforded the same opportunity to consider the evidence as the trial court.

2. Where the controlling facts are based upon written or documentary evidence by way of pleadings, admissions, depositions and stipulations, the trial court has no peculiar opportunity to evaluate the credibility of witnesses. In such situation, this court on appellate review has as good an opportunity to examine and consider the evidence as did the court below, and to determine De novo what the facts establish.

3. The language in a contract is ambiguous when the words used to express the meaning and intention of the parties are insufficient in a sense the contract may be understood to reach two or more possible meanings. It arises when application of pertinent rules of interpretation to an instrument as a whole fails to make certain which one of two or more meanings is conveyed by the words employed by the parties.

4. Where an ambiguous contract is prepared jointly and equally by the parties, it will not be liberally or strictly construed against either party.

5. Generally, when a lease requires the tenant to pay any "taxes," this provision requires payment of ad valorem taxes only and not special assessments.

6. In a declaratory action to determine the rights of the parties in a real estate lease, the record is examined and it is Held : (1) The contract is ambiguous as to the tenant's duty to pay tax increases upon extension of the lease; (2) the tenant had an obligation to pay such tax increases; (3) under the circumstances herein, the landlord waived his rights to tax increase payments until 1975; and (4) the term "taxes," as used in the lease, was limited to ad valorem tax increases.

Jerry G. Elliott of Foulston, Siefkin, Powers & Eberhardt, Wichita, argued the cause, and John F. Eberhardt, Richard D. Ewy and William P. Higgins, Wichita, were on the brief for appellant.

Everett C. Fettis, Wichita, argued the cause, and David R. McClure, Wichita, was with him on the brief for appellee.

McFARLAND, Justice:

This is an action for judicial determination of the rights and obligations of the parties under a written real estate lease. The declaratory judgment action was brought by the tenant, Crestview Bowl, Inc., who is plaintiff-appellee. The landlord-defendant, Womer Construction Co., Inc., counterclaimed for $24,971.52 allegedly due under the lease. The trial court entered findings and conclusions in favor of the tenant and the landlord appeals.

The first issue before this court is the proper standard of review. The matter was submitted to the trial court on the oral statements and stipulations of counsel and documentary evidence. No witnesses testified. The proper standard of review, as we stated in Fourth Nat'l Bank & Trust Co. v. Mobil Oil Corp., 224 Kan. 347, Syl. PP 1 and 2, 582 P.2d 236 (1978), is as follows:

"When a case is submitted to the trial court on an agreed stipulation of facts and documentary evidence, this court is afforded the same opportunity to consider the evidence as the trial court.

"Where the controlling facts are based upon written or documentary evidence by way of pleadings, admissions, depositions and stipulations, the trial court has no peculiar opportunity to evaluate the credibility of witnesses. In such situation, this court on appellate review has as good an opportunity to examine and consider the evidence as did the court below, and to determine De novo what the facts establish. (Following American States Ins. Co. v. Hartford Accident & Indemnity Co., 218 Kan. 563, 572, 545 P.2d 399 (1976).)"

Accord, In re Estate of Broadie, 208 Kan. 621, 624, 493 P.2d 289 (1972); Koch, Administratrix v. Prudential Ins. Co., 202 Kan. 229, 447 P.2d 825 (1968); North River Ins. Co. v. Aetna Finance Co., 186 Kan. 758, 352 P.2d 1060 (1960).

The entire record on which the trial court made its determination is before this court. After careful review of the record we adopt the findings of fact of the trial court, numbered 1-3, 5-17, and 19, with our additions and deletions where noted:

"1. Plaintiff, Crestview Bowl, Inc., is a corporation conducting a bowling business in property owned by and leased from defendant.

"2. Defendant, Womer Construction Co., Inc., is the owner of and lessor of the property in which plaintiff conducts its bowling business.

"3. On May 3, 1961, a lease agreement, the subject matter of this action, was entered into between plaintiff and defendant. . . . Those portions of the lease agreement which give rise to this controversy read as follows:

" 'Tenant in consideration of leasing the premises as above set forth, covenants and agrees with Landlord to pay to Landlord or its Assigns or successors as rent for the same, the sum of Three Hundred Eighty-four Thousand Dollars ($384,000.00) for said term of ten (10) years, payable in the following manner, to-wit: Said rent is to be paid monthly in advance, payable on the First day of each and every month, in the amount of Three Thousand Two Hundred Dollars ($3,200.00) each month. Tenant will also pay any increase in taxes starting with the year 1967 over and above the taxes for 1962.

" 'Landlord hereby grants to the Tenant, if the terms and conditions of this lease are fully and faithfully performed by said Tenant, to extend said lease for a period of ten years from the First day of June, 1971, to the 31st day of May, 1981, for a consideration as rent for same the sum of Four Hundred Twenty Thousand Dollars ($420,000.00), payable in advance at the rate of Three Thousand Five Hundred Dollars ($3,500.00) on the First day of each and every month.'

(Further, we find the lease contained an optional second extension as follows:

"Landlord hereby further grants to the Tenant, if the terms and conditions of this lease and first extension thereof are fully and faithfully performed by said Tenant, to extend said lease for a period of ten years from the First day of June, 1981, to the 31st day of May, 1991, for a consideration as rent for same the sum of Four Hundred Eighty Thousand Dollars ($480,000.00), payable in advance at the rate of Four Thousand Dollars ($4,000.00) on the First day of each and every month.")

"5. Warren A. Thomas and W. A. Thomas, (hereinafter referred to as Thomas) are one and the same person.

"6. At the time of the execution of the lease in 1961 and until sometime in 1974 Thomas was president, general manager, a director and member of the executive committee of plaintiff corporation. Thomas was at all times owner of approximately 25 per cent of the stock of plaintiff corporation. During the time Thomas was general manager of plaintiff corporation he received approximately $100.00 per week compensation.

"7. At the time of the execution of the lease in 1961 Thomas was secretary-treasurer of defendant corporation and was owner of approximately 25 per cent of the stock of defendant. Since approximately September 19, 1974, Thomas has been, in addition to secretary-treasurer, vice president and general manager of defendant. During the years 1961 through 1974 Thomas had authority to make day-to-day operating decisions for defendant. Major decisions affecting defendant's operations were retained in R. W. Womer, principal stockholder. The division of authority of defendant was a matter between R. W. Womer and Thomas. At all times Thomas received compensation for services performed for defendant. Thomas, through an organization of R. W. Womer, sold plaintiff its insurance coverage.

"8. Plaintiff's executive committee was composed of Thomas, president; Warren Tomlinson, vice president; and Forrest Rousey, secretary-treasurer.

"9. Financial statements of plaintiff were prepared each year by plaintiff's secretary-treasurer. These financial statements were received by Thomas and other stockholders. None of the yearly financial statements ever reflected any liabilities due defendant from plaintiff at any time. At the time Thomas received these financial statements he was secretary-treasurer of defendant. Thomas at no time took exception to any financial statement of plaintiff because it failed to include any indebtedness due defendant.

"10. In 1972 plaintiff declared and paid a stockholder's dividend of approximately $10.00 per share. In 1973 plaintiff declared and paid a stock dividend of approximately $1,000.00 per share. In 1972 and 1973 defendant was aware, through its secretary-treasurer and day-to-day operating manager, Thomas, that plaintiff was financially able to make payment on debts due defendant, if any.

"11. At an executive committee meeting of plaintiff sometime during 1967 or 1968, Thomas raised the matter of additional payments due defendant because of the tax increase provision in the lease. Plaintiff at that time was having financial difficulties and was unable to make the additional tax payments. At this meeting Tomlinson suggested that he talk with R. W. Womer and try and persuade him that defendant should waive the tax clause in the lease. Thomas urged Tomlinson not to talk to Womer. Thomas stated he would take the matter up with Womer. If Thomas ever discussed the waiver of the tax clause with Womer, Thomas never reported Womer's decision to Tomlinson and Rousey. If Womer declined to waive the tax clause in the lease, Thomas, as president and general manager of plaintiff, and as secretary-treasurer of defendant, has chosen to ignore Womer's decision.

"12. On March 6, 1973, approximately five years after Thomas stated he would discuss with Womer the waiver of the tax clause, Thomas wrote Tomlinson and Rousey. The subject matter of this letter, in general, was the financial situation of plaintiff. In this...