Lamson v. Horton-Holden Hotel Co.

• Decision Date: 13 December 1921
• Docket Number: 34104
• Parties: CLYDE O. LAMSON et al., Appellees, v. HORTON-HOLDEN HOTEL COMPANY et al., Appellants
• Court: Iowa Supreme Court

185 N.W. 472

193 Iowa 355

CLYDE O. LAMSON et al., Appellees, v. HORTON-HOLDEN HOTEL COMPANY et al., Appellants

No. 34104

Supreme Court of Iowa, Des Moines

December 13, 1921

REHEARING DENIED MARCH 11, 1922.

Appeal from Black Hawk District Court.--H. B. BOIES, Judge.

THIS action was begun at law, to recover rent upon lease of certain hotel property by plaintiffs to the defendants. Defendants appeared to the action, pleading several defenses to the plaintiff's demand. After issues joined, and after considerable evidence had been taken thereon, the defendants filed a cross-petition in equity, asking that a certain written modification of the original contract of lease be set aside and canceled, on the ground that the minds of the parties thereto never met upon the terms of such modification, and especially upon the amount of rental to be thereafter paid by the lessee. Upon the filing of the cross-petition, trial of the law issues was suspended, and the equitable issue was tried to the court. After hearing the evidence, the trial court found for the plaintiffs, and dismissed the defendants' demand for equitable relief. The defendants appeal.

Affirmed.

F. E Farwell and B. F. Swisher, for appellants.

Mears & Lovejoy, for appellees.

WEAVER J. EVANS, C. J., PRESTON and DE GRAFF, JJ., concur.

OPINION

WEAVER, J.

I.

The original lease, dated April 28, 1913, provided for a leasehold term of 20 years. The rental was fixed at the rate of $ 1,833.34 per month for the first year; $ 2,166.67 per month for the second year; and $ 2,625 per month for the succeeding period of eight years,--the monthly installment in each instance being payable in advance. At the end of ten years, the rental for the remainder of the term was to be re-adjusted. In 1917, the lessees, complaining that the business was insufficient to justify the rent required of them, sought to obtain a modification of the lease. After prolonged negotiations, in which both parties had the aid of experienced counsel, a supplemental agreement was made, and reduced to writing. That part of this later agreement which purported to modify the terms of the lease is in the following words:

"That the written agreement made and executed in triplicate on the 28th day of April, 1913, under which first parties leased to second parties what is commonly known as the Russell-Lamson Hotel property in Waterloo, Iowa, is hereby modified in the following respect: That for the unexpired portion of the first period of said lease which expires September 1, 1924, the following shall be substituted: The rent as herein provided shall be substituted in lieu of the rental of said agreement for said period. In the event the second party does not operate the Ellis Hotel in Waterloo, Iowa, the rental which second party shall pay to first party shall be as follows: two thousand ($ 2,000.00) dollars per month, payable in advance on the first day of each and every month, commencing April 1, 1917, and in addition thereto, one third of the receipts for guest rooms in excess of two hundred ($ 200.00) dollars per day."

The Ellis Hotel was not thereafter operated by the lessees, and the provision of the agreement made contingent upon its operation is, therefore, not material.

From the date of that instrument until the beginning of this litigation, something more than two years later, the parties seem to have regarded the modification of the lease as being the expression of their agreement, and defendants continued to pay the rental at the modified or reduced rate of $ 2,000 per month, though no accounting appears to have been had of the hotel's receipts for guest rooms. In September, 1919, this action was begun at law by the lessors, to recover their alleged share of such receipts, to the amount of $ 13,730.18. The issue at first raised upon this claim involved a dispute as to the true construction of the contract provision by which plaintiffs were to receive, in addition to the monthly rental of $ 2,000, "one third of the receipts for guest rooms in excess of $ 200 per day:" it being the contention of plaintiffs that this stipulation entitled them to the prescribed share of such receipts for each and every day in which they exceeded the minimum of $ 200, without regard to the days on which such receipts were below that limit; while defendants insisted that their obligation to pay plaintiffs any part of the receipts from guest rooms had reference to the yearly income from that source in excess of an average of $ 200 per day. Referring to this phase of the controversy, the defendants at first, among other things, answered as follows:

"That, if the language of said contract should appear uncertain to the court, as between the construction claimed by the plaintiffs and the construction claimed by the defendants, as hereinbefore stated, the facts and circumstances and relations of the parties clearly show that said contract in respect to the receipts for rooms was on the basis of one third of the excess of an average of $ 200 per day taken in for rooms, and settlement to be made on such average for the year, and that, under said contract, these defendants are owing to the plaintiffs $ 3,994.26, which these defendants have been at all times and are now ready and willing to pay, subject to certain credits which defendants claim to be entitled to, as set out in defendants' counterclaim or offset hereto attached."

Defendants also alleged that a mistake was made in drawing the written contract, and prayed that it might be reformed, to clearly show the intent of the parties to have been in accordance with the construction contended for by them. The demand for such relief was thereafter voluntarily withdrawn by defendants, who then filed an amended answer and cross-petition in equity, in which a cancellation of the supplemental contract is asked, on the ground that the minds of the parties had never met upon its terms, and in which it is further asked that their rights and liabilities be determined and adjudicated on the basis of the original lease.

That the nature and effect of defendants' pleading in this respect may be fairly stated, we will quote at large therefrom. After setting forth at length the circumstances under which the original lease and supplemental contract were made, and the controversy arising over its true meaning, the allegation proceeds as follows:

"That the defendants are now advised and believe and charge the fact to be that the plaintiffs believed that their oral conferences had resulted in an agreement whereby the defendant corporation agreed to pay a rental of $ 2,000 per month, payable in advance on the first day of each and every month, commencing April 1, 1917, and in addition thereto one third of the receipts for guest rooms in excess of $ 200 for each and every day that the receipts were over $ 200 per day. In other words, that the plaintiffs should have the advantage and be entitled to one third of the said excess receipts for every day that the receipts were over $ 200 per day, and that the excess could not be used for averaging the receipts, and the plaintiffs only entitled to one third of the excess over the annual average of $ 200 per day. That, on the other hand, the defendants believed that the negotiations had resulted in an agreement reducing the rent for the balance of the first 10-year period to $ 24,000 a year, plus one third of the receipts for guest rooms in excess of the annual average of $ 200 per day, which $ 24,000 of rental should be payable at the rate of $ 2,000 per month, in advance; and that the amount due from guest rooms should be payable annually after said amount had been ascertained through audit; and that the plaintiffs executed the written modification, believing that the said writing incorporated therein their understanding of the aforesaid oral negotiations or supposed agreement; and that the defendants upon their part executed the said written modification of the lease with the firm belief that it embodied therein their understanding as to the amount of rental, the terms of its payment, and the method of computation, as hereinbefore alleged. And defendants allege that, in truth and in fact, the said modification did not, by its terms, express the intention and meaning of either of the parties, plaintiffs or defendants, and was executed by the respective parties under mistake as to its contents and the true construction thereof; and said defendants allege that, by reason of the mistake of both parties, no oral agreement had in fact been reached, for the reason that the minds of the parties had failed to meet upon the amount of the rent, its method of computation, and terms of payment thereof, and that the written agreement was different with respect to said matters from what was intended by either party, and that the minds of the plaintiffs and defendants never met upon any oral proposition or agreement or upon the contents of the writing which they actually executed through mistake as aforesaid, and that, because of the matters and things herein alleged, the aforesaid modification of the lease is null and void, and should be canceled, and the parties restored to their original respective positions and obligations under the original lease."

Plaintiffs having taken issue upon this pleading, the cause, so far as it relates to defendants' equitable demand for cancellation of the supplemental contract, was tried to the court. The evidence offered related principally to the conversations and negotiations between the parties and between their counsel, preceding and leading up to the execution of the supplemental contract. As the prayer for a reformation of the contract was withdrawn, this testimony has little, if any, bearing on the question...