Johnson v. Korn

• Decision Date: 12 May 1938
• Docket Number: No. 3680.,No. 3755.,No. 3671.,3671.,3680.,3755.
• Citation: 117 S.W.2d 514
• Parties: JOHNSON et ux. v. KORN. MOLLISON et al. v. JOHNSON et ux. KORN v. SAME.
• Court: Texas Court of Appeals

117 S.W.2d 514

JOHNSON et ux. v. KORN.

MOLLISON et al. v. JOHNSON et ux.

KORN v. SAME.

No. 3671.

No. 3680.

No. 3755.

Court of Civil Appeals of Texas. El Paso.

May 12, 1938.

Rehearing Denied June 2, 1938.

Appeal from District Court, Pecos County; Jos. G. Montague, Judge.

Suit by Oskar Korn against W. D. Johnson and wife and others to enjoin defendants from forfeiting a lease or foreclosing the lien created by the lease contract and praying for the cancellation of an arbitration award, wherein W. D. Johnson and wife filed a cross-action, and suit by E. Mollison and Oskar Korn against S. C. Johnson and wife seeking the same relief with respect to other property, wherein defendants filed a cross-action which was withdrawn before verdict. From a judgment for plaintiff on the cross-action in the first suit, the named defendants appeal, and to review a judgment for defendants in that suit, plaintiff brings error, and to review a judgment for defendants in the second suit, plaintiffs bring error.

Judgment in each case affirmed.

Dan P. Johnston, of Fort Worth, and Wm. H. Flippen, of Dallas, for Korn and Mollison.

W. C. Jackson and R. D. Blaydes, both of Fort Stockton, for Johnson and another.

NEALON, Chief Justice.

S. C. Johnson and Oskar Korn entered into a contract dated February 27, 1929, calling for the construction by Johnson of a building in Fort Stockton to be rented, used and occupied by Korn as a motion picture theater. The contract is lengthy and will be set out and summarized only to such extent as may be necessary to an understanding of the issues. The lease was to continue for a period of 15 years. For the first 5 years rentals were to be based upon percentage valuation of the cost of the buildings and improvements and to be paid in monthly installments in advance, and lessee was to pay state and county taxes and insurance upon the property involved. It was stipulated that at the close of each 5 year period there should be a reasonable revision of the rental terms based upon the general business activity and rental values of similar property at Fort Stockton, and that in the event of disagreement, there should be arbitration of the controversy, each party being privileged to select a representative and the two being authorized to select a third arbitrator in the event of disagreement between them. The building was completed by S. C. Johnson and occupied by Korn until sometime in 1934, at which time Korn was delinquent in his rents upon this and the Alpine property hereinafter referred to in the amount of $8,366.87. The Fort Stockton property was conveyed by S. C. Johnson to his wife, Mrs. Lurline Johnson, on or about February 1, 1931, and thereafter became the property of Walter Donald Johnson, of which fact plaintiff was notified on or about February 1, 1937.

October 15, 1929, Johnson, as lessor, and Korn and E. Mollison, as lessees, entered into a contract which recited that Johnson had started building and had agreed to erect and complete on a specified location in the City of Alpine a theater building according to the same plans and specifications (except for a few agreed minor changes) as those of the Grand Theater building then operating at Fort Stockton. Johnson completed the Alpine building and in pursuance of the contract said lessees moved into it and began the operation of their business. The language of the contract respecting the rental terms of the Alpine property, in so far as it affects the issues involved, was substantially the same as that of the contract relating to the Fort Stockton property. Especially was this true as to the features involving insurance, revision of rental charges, and arbitration. The clauses relating to payment of taxes in the two instruments were as follows:

Fort Stockton contract:

"The party of the second part further agrees, that in consideration of this rental and lease agreement, that he will pay all such City-County-and State valuation taxes as may be assessed against said buildings and said lots, and that such taxes shall be paid on or before maturity date."

Alpine contract:

"The lessee further agrees that he will pay such City and County and State valuation taxes as may be assessed against said building and lot and such taxes shall be paid by the lessee on or before maturity date."

The insurance clause in the Fort Stockton lease read as follows:

"Further—the party of the second part agrees to carry an insurance policy in favor of the party of the first part to an amount equal to the actual loss adjustment in event of destruction by fire (meaning an amount that would be actually paid by an insurance company in event of loss by fire) to the holder of the policy, and it is understood that such policy shall be carried with a reputable company preferably specializing in Theatre Insurance.

"It is further agreed—that the party of the second part will also carry a Tornado insurance of not less than $5000.00 payable to the credit of party of the first part, and to keep such policy in full force and effect during the life of this agreement.

"Further—The party of the second part agrees to carry a Plate Glass Insurance, to the credit of the party of the first part, or in event of failure to do so shall be held liable at his own risk and expense to replace such loss to such glass, in event he should fail to carry such insurance to plate glass."

In 1934, in a Federal bankruptcy proceeding in Dallas, with the approval of the Court, the contracts were altered in some respects and a compromise of the accrued indebtedness was agreed upon. This compromise agreement was thereafter approved by the District Court of the 83rd Judicial District in and for Pecos County in a suit growing out of lessees' indebtedness under the contracts. By the adjustment made in 1934, it was agreed that the indebtedness for antecedent rent should be satisfied by the payment of $5,000, $2,000 of which should be paid in cash, and the balance as hereinafter stated; that 1934 taxes on both properties should be paid by Korn and his associate, Mollison, by January 31, 1935, but that one-twelfth of said taxes should be reserved out of the installment payable to Johnson in the month of January, 1935; that the delinquent rentals amounting to $3,000 and the rental up to January 3, 1937, which was fixed as a period at which there might be a revision of the contract as to rents, should be paid in 26 monthly installments of $573.79 each, $450 of each payment being for the current month's rent; that on default in the payment of any of said monthly installments the full amount of the original indebtedness should become immediately due and payable; that a lien should exist upon the furniture, fixtures and equipment to secure the payment of the monthly installments provided for; that the arbitration clause should be changed to provide that in the event the two arbitrators appointed by the parties failed to agree within 10 days, a third member of the arbitration board should be appointed by the then presiding judge of the 83rd Judicial District, and in the event either of the parties failed within 5 days of an arbitration date to name his arbitrator, the Court should name someone to act; that "taxes on and after 1934 as herein provided to be paid by lessor shall be limited and restricted to the real estate and its improvements, and in no wise to be upon the furniture, fixtures and/or equipment of the lease, which tax shall and is to be a charge against the lessee only and paid by him or it, and in such manner as to never become delinquent; * * * that on each of the theatres sufficient insurance shall be carried on furniture, fixtures and equipment as to cover the outstanding indebtedness due hereunder, and to be written in the name of the lessor and the lessee as their respective interests may appear." Neither of the original contracts required insurance upon the furniture, fixtures and equipment. The altered contract contained no other mention of insurance. It was also provided that except as stipulated and modified, the lease agreements as to the Fort Stockton and Alpine properties should remain and control in every respect. The original contract contemplated that the equitable revision of rental terms provided for therein might effect either an increase or decrease, as conditions warranted.

January 12, 1937, the time fixed for the revision of the rental provisions, Korn and S. C. Johnson met, but failed to agree as to the amount of rents to be paid for the succeeding 3 years. Korn appointed as his arbitrator T. W. Talliaferro and the defendants appointed Jack Hubbs. Upon the failure of these two arbitrators to agree, Judge C. R. Sutton, of the 83rd Judicial District, appointed T. R. Logan, who served but a short time and resigned. Thereupon Judge Sutton appointed John F. Allison to act as the third arbitrator. The arbitrators met a number of times and a majority of them, to-wit, Allison and Hubbs, made a written report on January 30, 1937. Taliaferro did not sign the report. The report or award (omitting formal portions) is in the following language:

"We, John F. Allison of Uvalde, Texas, and T. W. Talliaferro, of Fort Worth, Texas, and Jack Hubbs of Fort Stockton, Texas, met as a board of arbitrators on Tuesday, 26th day of January, 1937, at Fort Stockton, Texas, for the purposes of determining the amount of rents that Oskar Korn and Ernest Mollison (or their assignees, if they have such) should pay to Mrs. Lurline Johnson and Walter Donald Johnson, successors of S. C. Johnson in title to the property known in Fort Stockton as the theatre building, now being operated by O. K. Theatres and also the theatre building in Alpine, Texas, now being operated by the same theatre company. After fully investigating the business activities of each of the towns of Fort Stockton and Alpine and the rent value of similar properties at the present time and taking into consideration a bona fide offer Mr....