Edgewater Health Care, Inc. v. Health Systems Management, Inc., s. 53128

• Decision Date: 26 April 1988
• Docket Number: 53188,Nos. 53128,s. 53128
• Citation: 752 S.W.2d 860
• Parties: EDGEWATER HEALTH CARE, INC., Plaintiff/Appellant/Cross-Respondent, v. HEALTH SYSTEMS MANAGEMENT, INC. and Homar Enterprises, Inc., Defendants/Respondents/Cross-Appellants.
• Court: Missouri Court of Appeals

Page 860

752 S.W.2d 860

EDGEWATER HEALTH CARE, INC., Plaintiff/Appellant/Cross-Respondent, v. HEALTH SYSTEMS MANAGEMENT, INC. and Homar Enterprises, Inc.,

Defendants/Respondents/Cross-Appellants.

Nos. 53128, 53188.

Missouri Court of Appeals,

Eastern District,

Division Four.

April 26, 1988.

Motion for Rehearing and/or Transfer to Supreme Court Denied

May 25, 1988.

Application to Transfer Denied July 26, 1988.

Craig A. Sullivan, St. Louis, for plaintiff/appellant/cross-respondent.

Gregory H. Wolk, James M. Wasserman, Tockman, Schraeder & Wolk, St. Louis, for defendants/respondents/cross-appellants.

SIMON, Presiding Judge.

This appeal arises out of an action in the Circuit Court of St. Louis County by plaintiff, Edgewater Health Care, Inc. (Edgewater), seeking past due rental payments and reimbursement of real property taxes, plus interest, from defendants, Health Systems Management, Inc., and its assignee, Homar Enterprises, Inc. (hereinafter collectively referred to as H.S.M.). H.S.M. filed a counterclaim for breach of contract seeking reimbursement of certain maintenance expenditures. At the close of all evidence, the trial court directed a verdict for Edgewater in the amount of $1,404.00 for the past due rental payments. The jury awarded Edgewater $21,281.45 for reimbursement of the real property taxes. The judge awarded prejudgment interest to Edgewater amounting to $5,092.98. The jury awarded H.S.M. $38,184.33 on its counterclaim for reimbursement of expenditures. No prejudgment interest was awarded to H.S.M. The verdicts were offset against each other entitling H.S.M. to recover $10,405.90. Edgewater appeals the judgment on the directed verdict and H.S.M. cross-appeals on the real property taxes judgment and the trial court's failure to grant prejudgment interest on the reimbursement of expenditures judgment.

Specifically, Edgewater raises three points, all of which essentially contend that the language in paragraphs 3 and 7 of the lease is ambiguous and that the trial court erred in not allowing other evidence to establish the intent of the parties. In its cross-appeal, H.S.M. raises five points: (1) that Edgewater failed to make a submissible case in its claim for reimbursement of real property taxes; (2) that the trial judge erred in submitting Instruction Number 7, a verdict director patterned after MAI 26.06, without an additional "separate factors" instruction; (3) that the trial court erred in not giving the jury specific directions to disregard testimony of James Daake regarding settlement negotiations; (4) that the trial court erred in not submitting H.S.M.'s instructions on its affirmative defense of accord and satisfaction; and, (5) that the trial court erred in not granting prejudgment interest on the reimbursement of expenditures judgment.

The facts in the light most favorable to the verdicts are as follows: Edgewater is the owner of Chesterfield Manor, a nursing home in St. Louis County. The parties entered into protracted negotiations to lease the nursing home. Both parties submitted drafts of a proposed lease prior to the final draft. The record does not indicate which party submitted its draft first or which party prepared the final draft that was executed by the parties on June 1, 1980. The term of the lease was divided into an initial term of three years, from July 1, 1980, to June 30, 1983, with six three year options. The pertinent provisions of the lease covering the monthly lease payment and the option to extend the lease are as follows:

3. OPTION TO EXTEND LEASE.

LESSORS [Edgewater] hereby grant to LESSEE [Health Systems Management, Inc.] or their assignees [Homar Enterprises, Inc.] an option to extend the LEASE for six (6) additional three (3) year periods. The consideration for the exercise of this extension shall be that the Eight Thousand Five Hundred Dollar ($8,500.00) base amount as explained in paragraph 7 shall be increased or decreased by the average percent of increase or decrease of the last three (3) year period of the consumer price index. All other considerations will stay the same.

This option shall be exercised, if so desired, by LESSEES' written notice to LESSORS not less than three (3) months prior to the effective date of each extension.

* * *

* * *

7. The LESSEES shall make monthly payments of Eight Thousand Five Hundred Dollars ($8,500.00) on the tenth (10) of each month starting with the first month and continuing for the period of the LEASE, additional payment will be required at the end of each month based on the occupancy for the preceding month, this amount will be determined as follows: the total number of occupied bed days for the month will be added and then divided by the number of days in the month, based on this figure, for every resident over one hundred (100), Three Hundred Dollars ($300.00) will be paid. However, in no event will the additional payment referred to above in excess of the base rent of $8,500.00 per month exceed $17,000.00 per month and furthermore in no event will the additional monthly payment be less than the amount of the next preceding month. In any event, the LESSEES agree to pay the maximum of $17,000.00 per month commencing no later than the nineteenth (19) month of the LEASE ...

The dispute giving rise to Edgewater's claim concerns the determination of the monthly lease payments during the option periods.

At the expiration of the initial three year lease period, the parties sought to determine the amount of the new monthly lease payment. Edgewater calculated the new monthly payment to be $20,750 and H.S.M.'s calculations yielded a figure of $17,590 per month. The difference in these figures occurred as a result of varying interpretations of paragraph 3 and paragraph 7 of the lease. Edgewater maintains that the phrase "base amount as explained in paragraph 7" in paragraph 3 equates to $17,000, and not $8,500 as H.S.M. claims. Furthermore, Edgewater argues that the sum of the percentage changes in the consumer price index for the previous three year period ought to be utilized as the multiplier pursuant to paragraph 3, while H.S.M. contends the average percentage change, or one third, of the total percentage change in the consumer price index during the three year period is the appropriate multiplier.

Prior to trial, Edgewater made an extensive offer of proof with regard to parol evidence concerning paragraphs 3 and 7. The trial judge sustained H.S.M.'s motion in limine requesting the exclusion of the parol evidence and ruled as a matter of law that the language in the two paragraphs is unambiguous. Therefore, the trial court directed a verdict for Edgewater in the amount of $1,404.00 at the close of all the evidence. This amount was stipulated by the parties as being the amount H.S.M. underpaid rent during the previous three year period if the trial court found in H.S.M.'s favor in the interpretation of paragraphs 3 and 7.

H.S.M.'s cross-appeal concerns the breach of lease claim by Edgewater regarding the real property taxes. The property is described as the "Demised Premises" in the lease. In its first paragraph, the lease refers to "Schedule A," which describes the "Demised Premises." Paragraph 25 of the lease, entitled "The Leased Premises," states in pertinent part:

1. The LEASE referred to herein refers to the actual parcel leased which includes all of the improvements and buildings and ground area located within the asphalt drive and parking area shown on a survey of said premises marked Exhibit ___ attached hereto together with a fifty (50) foot wide strip of ground adjoining the outer edges of the asphalt drive and parking area.

The Exhibit blank (presumably "A" as in "Schedule A" referred to previously in the lease) was not filled in. Furthermore, neither Schedule A nor Exhibit __ were attached to the lease.

Edgewater owns a tract of real estate totaling 28 to 30 acres. It is undisputed that the Demised Premises includes the nursing home plant on seven of those acres. This is the only portion of the total acreage with improvements thereon. Edgewater never subdivided the property and the real property tax assessments and tax bills were for the entire 28 to 30 acres.

When the lease was prepared and ready for signing, a discussion ensued between Dr. John Daake for Edgewater and Darrell Hoefling, vice-president of H.S.M., relative to the real property taxes. The typewritten lease did not contain a provision for real estate taxes. Following discussion of the subject, Mr. Hoefling wrote into the lease by interlineation the following: "Lesees [sic] agree to pay 1/2 of the real estate taxes when they become due to be held in reserve monthly." Since the handwritten clause did not specify whether H.S.M. should pay one half of the real property taxes for the demised premises or one half of the taxes on the entire plot of land, the trial court found the clause to be ambiguous and allowed additional evidence to ascertain the intent of the parties.

In October, 1980, Tom Eggers of Edgewater billed H.S.M. for one half of the 1980 real estate taxes. In November, 1980, Mr. Hoefling wrote Mr. Eggers a letter pointing out that H.S.M. had only been in possession of the leased premises for one half of 1980. Furthermore, Mr. Hoefling asserted that Edgewater never supplied a survey of the Demised Premises to H.S.M. The survey referred to by Mr. Hoefling is the aforementioned Schedule A or Exhibit __. Apparently, H.S.M. sought to pay its share of taxes only on the demised premises and not on the entire tract. Mr. Hoefling concluded his letter by stating, "it appears to us that we will have to discuss further and reach an understanding of what taxes we are obligated to pay on the leased premises only and not the tract as a whole."

James Daake, Edgewater's vice-president, testified that early in 1981, he and Mr. Hoefling met to discuss the 1980 real property tax bill. Mr. Daake testified that he told Mr. Hoefling...