Kirkland & Co. of Anniston, P.C. v. A & M Food Service, Inc.
| Decision Date | 11 January 1991 |
| Citation | 579 So.2d 1278 |
| Parties | KIRKLAND & COMPANY OF ANNISTON, P.C., et al. v. A & M FOOD SERVICE, INC., et al. 89-475. |
| Court | Alabama Supreme Court |
David M. Smith, James M. Proctor II and Jayna J. Partain of Maynard, Cooper, Frierson & Gale, Birmingham, for appellants.
Wilford J. Lane and Harry Long, Anniston, for appellees.
The plaintiffs, Kirkland & Company of Anniston, P.C.; Kirkland & Co. of Birmingham, P.C.; and Kirkland & Co. of Gadsden, P.C. (collectively referred to hereinafter as "Kirkland"), appeal from a jury verdict in favor of A & M Food Service, Inc., Alexander Sexton, Michael Sexton, and Janice Sexton.
On November 26, 1975, Charles T. Sweeney and Jean Sweeney, owners of land in Anniston, Alabama, and Fred Pierson and Harold Griffin executed a lease agreement. Pursuant to the terms of the agreement, the Sweeneys constructed a building on their property in accordance with agreed-to specifications and leased the land and the building to Pierson and Griffin, who intended to operate a pizza business. The term of the lease was 15 years, and, at the end of the 15-year term, the lessees had the option to renew the lease for two five-year terms. The lease provides, in pertinent part:
On July 7, 1977, the Sweeneys sold the property and assigned their interest in the lease to Kirkland, which had obtained a bank loan in order to finance the purchase of the property. Pierson and Griffin made monthly rental payments directly to the bank, which credited Kirkland with the payment. George Smith, an employee of, and a stockholder in, Kirkland & Company of Anniston, testified that Kirkland depended on the lessees' monthly payments in order to pay its debt on the note to the bank.
On March 12, 1986, Kirkland acquiesced to Pierson and Griffin's subletting the property to A & M, pursuant to a provision in the lease agreement. The assignment agreement provided that Pierson and Griffin remained obligated under the terms of the lease agreement and that A & M would "be governed by all terms of the original lease." It further provided that, on the closing date of the assignment agreement, A & M would provide hazard insurance, naming Kirkland as the loss-payee for no less than the appraised value of the building, that A & M would pay all real estate and ad valorem taxes, and that, on the date of the closing, A & M would pay the first and the last month's rent. Kirkland's acquiescence to the assignment agreement was also based on the personal guarantees of Alexander Sexton, Michael Sexton, and Janice Sexton, who were officers of A & M.
On the date the assignment agreement was executed, A & M wrote checks in the following amounts and for the following purposes: $1,150 for both its portion and Pierson and Griffin's portion of rent for March 1986; $4,954.77 for ad valorem taxes owed previously by Pierson and Griffin; $463.19 for ad valorem taxes; 1 $1,150 for advance rent; 2 and $615.40 for casualty insurance for the rental property.
On April 4, 1986, A & M paid $1,150 rent directly to the bank for the month of April. Kirkland accepted the payment.
On April 8, 1986, Kirkland deposited with its bank A & M's check for $4,954.77 for ad valorem taxes. Due to insufficient funds the check was returned to Kirkland on April 11, 1986. On April 23, 1986, counsel for Kirkland sent, and on May 2, 1986, A & M received, a certified letter in which Kirkland stated that, because A & M had not paid the ad valorem taxes, it was invoking all remedies available to it pursuant to the lease agreement, including termination of the lease and acceleration of the rental payments, and was requiring immediate payment of the outstanding ad valorem taxes and attorney fees. On May 5, 1986, Alexander Sexton delivered a cashier's check to Stanley Nelson, an employee of, and a stockholder in, Kirkland & Company of Anniston, for the entire amount of the outstanding ad valorem taxes. Nelson accepted the payment. Nelson testified that when Sexton delivered the cashier's check, he told Sexton that rental payments should be made in a timely fashion. Sexton testified that no such remark was made at that time.
Both Alexander Sexton and Dr. K.K. Verma, who had previously sold a franchise in his pizza business to A & M in return for 5% of the gross profits of the business, testified that Sexton discussed the possibility of selling the franchise in Anniston back to Dr. Verma. Dr. Verma told Sexton that he would not be willing to purchase the business unless he could assume the lease of the property owned by Kirkland. Sexton said that at some time on or after he delivered the check to Nelson, Sexton said he mentioned to Nelson that A & M was negotiating to sublet the property. He said Nelson told him that Kirkland would prefer to sell the property rather than approve a sublease. There was evidence presented that Dr. Verma contacted Nelson about subletting the Kirkland property and that Nelson told Dr. Verma that Kirkland would prefer to sell the property. Nelson denied that that conversation took place.
Nelson testified that, at some time in May 1986, the bank informed Kirkland that it had not received a complete payment on the note for that month. 3 Nelson said that he instructed the bank not to accept A & M's check when it arrived. Thereafter, the bank received a check from A & M for $1,150, the amount due for rent in May 1986; the check was dated May 15, 1986. Nelson testified that the check was received by the bank on May 30, 1986.
On June 3, 1986, counsel for Kirkland notified Pierson, Griffin, A & M, and the Sextons that, because A & M had not made timely payment for the May rent, A & M was in default and Kirkland was terminating the lease pursuant to the lease agreement and was demanding payment for the balance of the term of the lease. A & M ceased its business operations, vacated the premises, and Kirkland took possession of the property.
Kirkland filed a complaint against A & M, the Sextons, Pierson and Griffin, alleging that because A & M's May 1, 1986, lease payment had been received on May 30, 1986, it had, pursuant to the terms of the lease, terminated the lease and accelerated the payment from the defendants of the balance due under the lease; and it sought $69,000 as the balance accelerated, and attorney fees. The defendants filed motions to dismiss the complaint for failure to state a claim upon which relief could be granted; the motions were denied. Pierson and Griffin filed a cross-claim against co-defendants A & M and the Sextons, alleging that those co-defendants were liable to Pierson and Griffin for the entire amount of any judgment awarded to Kirkland and against Pierson and Griffin. Co-defendants A & M and the Sextons, filed an answer to the complaint, denying Kirkland's allegations, raising several defenses, and demanding a jury trial. They also filed a two-count counterclaim. In count one of the counterclaim, they alleged that Kirkland had maliciously, wantonly, or intentionally terminated the lease without legal cause; in count two, they alleged a negligent termination of the lease without legal cause. They demanded damages for a loss of profits from an ongoing business. In an amendment to their counterclaim, A & M and the Sextons added a third count, alleging that Kirkland had wrongfully and without just legal cause...
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