Dehner Urban Redevelopment Corp.--St. Louis v. Dun & Bradstreet, Inc., KCD

• Decision Date: 12 June 1978
• Docket Number: No. KCD,KCD
• Citation: 567 S.W.2d 700
• Court: Missouri Court of Appeals
• Parties: DEHNER URBAN REDEVELOPMENT CORPORATION ST. LOUIS, Plaintiff-Appellant, v. DUN & BRADSTREET, INC., Defendant-Respondent. 28744.

Page 700

567 S.W.2d 700

DEHNER URBAN REDEVELOPMENT CORPORATION ST. LOUIS, Plaintiff-Appellant, v.DUN & BRADSTREET, INC., Defendant-Respondent.

No. KCD 28744.

Missouri Court of Appeals,Kansas City District.

June 12, 1978.

Thomas A. Sweeny(Popham, Popham, Conway, Sweeny & Fremont, P. C.), Kansas City, for plaintiff-appellant.

Sam L. Colville, Stephen D. Aliber, Kansas City, for defendant-respondent; Shook, Hardy & Bacon, Kansas City, of counsel.

Before PRITCHARD, P. J., SWOFFORD, C. J., and DIXON, J.

DIXON, Judge.

The trial court, sitting without a jury, found against the plaintiff on both counts of its petition for damages under and reformation of a lease agreement and found for the defendant on its counterclaim for monies mistakenly and inadvertently paid under the lease.Plaintiff appeals seeking a reversal of the trial court's judgment on Count II which requested reformation and seeking reversal of the judgment in favor of defendant on defendant's counterclaim.

The operation of the tax escalation clause contained in a lease agreement between plaintiffDehner Urban Redevelopment Corporation-St.Louis (hereinafter "Dehner"), as lessor, and defendantDun & Bradstreet, Inc.("D & B"), as lessee, is the genesis of the dispute.The lease provided for a 20 year lease period with options to renew the lease.The tax escalator clause provides that:

"the annual rental payable under this lease shall be increased by an amount equal to the amount by which the real estate taxes (including any special assessments) assessed and paid by the Lessor for any tax year during the term or any renewal term hereof is greater than the 'Lessor's Tax Payment.' "

The "Lessor's Tax Payment" is defined in the lease to mean:

"The real estate taxes, including any special assessments, assessed and paid by the Lessor for the first tax year after the beginning of the term of this lease in which the property with all improvements is assessed for real estate tax purposes."(emphasis added).

Relevant here is a portion of the Urban Redevelopment Corporations Law:

"The real property of urban redevelopment corporations acquired pursuant to this chapter shall not be subject to assessment or payment of general ad valorem taxes imposed by the cities affected by this law, or by the state or any political subdivision thereof, for a period of ten years after the date upon which such corporations become owners of such real property, except to such extent and in such amount as may be imposed upon such real property during said period measured solely by the amount of the assessed valuation of the land, exclusive of improvements . . . ."(emphasis added).§ 353.110 RSMo 1969.

The City of St. Louis, Missouri, by ordinance, adopted the provisions of the statute.

Initial discussions concerning the erection of a building and the leasing of it to defendant began in 1960 or 1961 between Charles Dehner, President of Dehner, and Jay Smith, then Vice President of D & B.On January 4, 1962, a written proposal was submitted to D & B by Dehner.The letter confirmed a conversation between Mr. Smith and Mr. Dehner in which Dehner proposed to construct for D & B a building in the Mill Creek Renewal Area.This letter further stated:

"We offer to build and lease this building to you for a twenty-year term at an annual rental of $27,500.00, payable monthly in advance, with the usual real estate escalator clause providing any increase in real estate taxes or special assessments after the first year following completion of the building will be assumed by you as additional rental.

Our rental figure is based on the taxes being paid on the present assessment of the land only, with the improvements not being subject to any real estate tax the first ten years.Thereafter, for the next fifteen years, the real estate taxes will be based on 50% of the normal assessment of the property.There should be no increase in taxes, therefore, for the first ten years of the leased term."

A week later Mr. Dehner wrote another letter to Mr. Smith reviewing the real estate taxes applicable to urban redevelopment in St. Louis and the tax escalator clause.Regarding the tax escalator clause, the letter states:

"Your lease tax escalator clause will be based on your first year of occupancy.Taxes will be at a minimum the first ten years.However, I want to be sure it is understood that taxes will increase drastically after ten years.It will be based on the true value and will be charged at fifty percent of that value.I would estimate based on today's tax rate of approximately $44.00 per thousand and with some increases that taxes will go up $5,000.00 to $7,500.00 per year on this property.The lease tax escalator clause will cover any increases after the first full year of occupancy."

Thereafter, J. McKeen, Treasurer of D & B, responded with a letter of intent.The letter, dated January 17, 1962, reads, in pertinent part, as follows:

"The purpose of this letter is to express the intent of Dun & Bradstreet, Inc. to lease from you the building you expect to construct at St. Louis, Missouri, as proposed in your letter dated January 4, 1962 . . .

It is expressly understood that this letter of intent will enable you to proceed to have final plans, specifications, and working drawings prepared. . . .

It is further understood that Dun & Bradstreet, Inc. shall have no obligation to you unless and until final plans and specifications are approved by Dun & Bradstreet, Inc. and a definitive lease between Dun & Bradstreet, Inc. and your company for the premises described in your letter dated January 4, 1962 is approved and executed."

The location for the proposed building was not approved by Urban Renewal, so there was a change in location; and, by letter, the parties agreed to a change of location but with the same conditions.

Subsequently, a draft of the lease was prepared by Mr. McGannon, Dehner's attorney, who participated in the negotiations concerning the final agreement.Mr. McGannon testified that the language in the final lease meant the same thing to him as in his original draft, that is, that D & B would pay the increase in taxes after the first full tax year.The language Mr. McGannon used for the tax escalator clause in the original draft was that, "any increase in real estate taxes or special assessments applicable to the demised premises occurring after the first full tax year during the term of this lease shall be borne by the Lessee."This language came from the correspondence Dehner had with D & B which was furnished to Mr. McGannon and which was available to him when he prepared the draft.Mr. McGannon submitted the prepared draft to Mr. Dehner who sent a copy to D & B.

Mr. Bingham, Secretary of D & B, wrote a letter accompanied with a copy of the draft to the law firm of White & Case, who served as outside counsel.Pertinent to the tax escalator clause, the letter said, "Basically the deal is for a 20 year lease as sole occupant of a building to be constructed in the redevelopment area at an annual rental of $27,500, we to pay any increase in real estate taxes or special assessments after the first full tax year during the term of the lease, . . . .

White & Case reviewed the letter and draft and in their reply letter to D & B suggested that consideration be given to:

"(a) Providing that the basic real estate tax liability shall be a sum equal to the real estate taxes payable by Lessor for the second fiscal tax year in which the building is assessed, for tax purposes, as a fully completed building (is more apt to result in fair base figure for a tenant's purposes)."

While the same idea as that expressed in the above letter is carried out in the final agreement, that precise language is not used.

On August 3, 1962, Dehner executed the lease agreement, and D & B executed it on August 13, 1962.Between these two dates, Prudential Insurance Company prepared a lease analysis dated August 10, 1962.Prudential was to furnish the end loan money on the building so Dehner had to have a lease which would meet with Prudential's approval.A copy of the lease analysis was sent to Dehner.In the lease analysis, the provision concerning "rental" is as follows:

"As additional rent, Lessee shall pay annually an amount equal to the amount by which the real estate taxes (including any special assessments) assessed and paid by Lessor for any tax year during the term or any renewal term is greater than "Lessor's tax payment," which is defined as the real estate taxes, including any special assessments assessed and paid by Lessor for the first tax year after the beginning of the term of the lease in which the property with all improvements is assessed for real estate tax purposes."

This language is substantially identical with similar language in the final lease.Prudential approved the final lease agreement.

In addition to the lease agreement, a separate document was signed by Dehner and D & B.This document, dated February 19, 1963, states that the lease in question "constitutes the entire lease agreement between the parties . . . .

Mr. Dehner testified that it was his intention that the final lease accurately portray the agreement reached in the correspondence between Dehner and D & B and that he would not have signed a document if he thought it didn't portray the agreement as set out in these letters.If he obligated himself to pay an additional $5,000 or $7,500 in taxes, the deal would be a loss.Mr. Dehner further testified that he had a...