Mansfield Development Co. v. Centennial Enterprises, Inc.

• Decision Date: 03 June 1976
• Docket Number: No. 75--592,75--592
• Citation: 38 Colo.App. 36,554 P.2d 1362
• Parties: MANSFIELD DEVELOPMENT CO., a Colorado Corporation, et al., Plaintiffs- Appellees, v. CENTENNIAL ENTERPRISES, INC., a Colorado Corporation, Defendant-Appellant. . III
• Court: Colorado Court of Appeals

Page 1362

554 P.2d 1362

38 Colo.App. 36

MANSFIELD DEVELOPMENT CO., a Colorado Corporation, et al Plaintiffs- Appellees, v. CENTENNIAL ENTERPRISES, INC., a Colorado Corporation Defendant-Appellant.

No. 75--592.

Colorado Court of Appeals, Div. III.

June 3, 1976.

Rehearing Denied July 15, 1976.

Certiorari Granted Oct. 12, 1976.

Williams, Erickson & Wallace, P.C., Wayne D. Williams, Westel B. Wallace, Denver, for plaintiffs-appellees.

Litvak, Schwartz & Karsh, Lawrence Litval, J. Jeffrey Mojcher, Denver, for defendant-appellant.

BERMAN, Judge.

This case involves the interpretation of an escalation or linkage clause ¹ in a sublease, dated June 1, 1972, between the parties. The trial court adopted the plaintiffs' interpretation of the clause and defendant appeals. We affirm.

The clause in question provides:

'The annual minimum lease fee payable to Lessors shall be adjusted at one year intervals commencing with the lease fee due June 1, 1973, and every year thereafter to reflect the average change in the purchasing power of the dollar. Such adjustments shall be on the following basis: The Consumers Price Index as prepared by the United States Department of Labo shall be used as the basis of computation. Said index shall be taken for May 1 of each year during the term of this agreement and the price index thus obtained shall be considered the applicable index for the rent payable during the next ensuing fiscal year. Said index obtained shall be compared with the price index figure for May 1, 1972 and the $78,000 annual rent figure shall be varied (either increased or decreased) in the same ratio that the price index for the period bears to the price index figure of May 1, 1972. The formula for the rent is as follows: New rent for the next succeeding year is to $78,000 as the average price index for the past year period is to price index of May 1, 1972. .. .'

The disute between the parties is over what should be considered the applicable index figure to be used in the computation. Plaintiffs contend, and the trial court agreed, that the applicable indes is the May 1, 1973, figure for rent due June 1, 1973. Relying upon the phrase in the last sentence, 'the average price index for the past year,' defendant contends that the applicable index is to be arrived at by adding the monthly figures for the past 12 ro 13 months, and dividing that sum by 12 or 13, respectively.

Both parties presented expert testimony to support their respective formulas. Plaintiffs' experts testified that the May 1, 1973, Price Index figure was itself an average, and that the method used by plaintiffs would most closely reflect the change in purchasing power of the dollar from one June 1 to the next June 1. Plaintiffs' experts further testified, and defendant's expert agreed, that plaintiffs' formula reflected the average change in the purchasing power of the dollar during the past year, and that the Price Index is a weighted average of price changes. ² Thus, plaintiffs' experts disputed defendant's contention that the phrase, 'average price index for the past year,' required averaging the monthly Price Index figures for the preceding twelve months.

Furthermore, attached to the sublease was a copy of the lease between plaintiffs and the owners of the property, and, in contrast to the escalation clause here, the clause in the original lease specifically provided for the type of formula that ...