Milgram Food Stores, Inc. v. Gelco Corp.

• Decision Date: 07 October 1982
• Docket Number: No. 81-0289-CV-W-8.,81-0289-CV-W-8.
• Citation: 550 F. Supp. 992
• Parties: MILGRAM FOOD STORES, INC., Plaintiff, v. GELCO CORPORATION, Defendant.
• Court: U.S. District Court — Western District of Missouri

550 F. Supp. 992

MILGRAM FOOD STORES, INC., Plaintiff, v. GELCO CORPORATION, Defendant.

No. 81-0289-CV-W-8.

United States District Court, W.D. Missouri, W.D.

October 7, 1982.

Alvin D. Shapiro, Kansas City, Mo., for plaintiff.

James Borthwick and James D. Conkright, Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, Mo., for defendant.

MEMORANDUM AND ORDER

STEVENS, District Judge.

Plaintiff Milgram Food Stores, Inc., a Missouri corporation, brought this action to recover $48,363.10 paid by mistake to the Feld Truck Leasing Division of defendant Gelco Corporation, a Minnesota corporation, on or about December 2, 1980. (For clarity and simplicity, defendant will hereinafter be referred to as Feld rather than Gelco.) Feld counterclaimed for a setoff of $43,169.77, based on another alleged indebtedness. Its tender of the remaining $5,193.33 was refused by Milgram.

The parties have filed an extensive stipulation with supporting exhibits, and each has moved for summary judgment in its favor. It is agreed that Milgram is entitled to return of the $48,363.10 paid by mistake unless Feld prevails on its counterclaim; moreover, as briefing on the cross motions progressed, the parties recognized that the presence of material disputed facts precludes summary judgment in favor of Feld on its counterclaim. Thus, the only question before the court is whether summary judgment should be entered in favor of plaintiff on the counterclaim. The court has concluded that it should, based upon the stipulated facts hereinafter summarized.

Pursuant to a master vehicle leasing agreement signed March 14, 1974, Feld at various times from 1974 to 1978 leased a total of sixteen vehicles to Milgram. On September 8, 1979, Feld notified Milgram that a rate increase was necessary to continue the leasing arrangement. Milgram rejected the proposal, and later that month, Feld notified Milgram it would exercise its right to terminate all leases under paragraph sixteen of the master lease. During the next several months, Feld gave the required notice and terminated the specific leases on their anniversary dates. Feld also exercised its option to require Milgram to purchase the vehicles.

Under paragraph sixteen of the master lease, upon termination Milgram was required to pay Feld "a sum equal to the prorated cost to Feld ... of unexpired license tags, personal property tax, Federal Highway Use tax, and any other or similar taxes, fees, insurance and prepaid expenses and other expenses for the vehicles with respect to which such termination is effective and any asset loss caused by such termination ...." (emphasis added) Pursuant to this provision, Feld prepared and submitted to Milgram "buy-out" figures on all sixteen vehicles. Among the components of the calculations were charges for interest, get-ready costs, lettering and painting, and investment tax credit. Milgram rejected these components, stating that such costs had previously been incorporated into the "capitalized agreed value" of each vehicle, and hence it would not pay such costs twice.

By letter dated November 20, 1979, Feld "proposed to transfer title to each of the vehicles for a purchase price calculated as provided in the computations ... less the amounts shown for interest, get ready cost, lettering/painting and investment tax credit." "If you accept this proposal, we agree to waive the amount shown for each vehicle for get ready cost, painting/lettering and investment tax credit." Feld stated that any such payment would be accepted "under protest due to business necessity without the intention or effect of waiving our rights under the lease ...." "Feld reserves the right to institute suit against Milgram's to recover the amount of $43,169.77 for interest for all of the vehicles." (This is the amount Feld now seeks on its counterclaim.) At the bottom of the letter, Feld provided a space for Milgram to sign under the legend "Understood and agreed to." Milgram never signed the letter. Sometime later, Feld sent Milgram invoices for each of the four disputed items on several of the vehicles; Milgram still refused to pay.

Paragraph sixteen of the master lease provides: "Feld shall retain title to all vehicles purchased by Lessee pursuant to this paragraph to secure full payment of the purchase price thereof for all vehicles so purchased." Feld's "Contract Buy-Out Computation" form for each vehicle states: "Titles will not be given to customer until payment is made to Feld in an acceptable manner for agreed amount of above computation plus outstanding accounts receivables." Feld gave Milgram title to all sixteen vehicles as it received the corresponding checks from Milgram, none of which included payment for the disputed interest item.

On January 15, 1980, Milgram gave Feld a check for $161,453.60, as payment for eleven of the sixteen vehicles. Typewritten on the face of the check was this statement: "IN FULL PAYMENT FOR TITLE TO AND IN FULL SETTLEMENT OF ALL CLAIMS UNDER LEASE TO MILGRAM FOOD STORES, INC., OF TRACTORS NUMBER C-1215 THROUGH C-1225." (The other checks given by Milgram to purchase the other five vehicles bore no such legend.) Upon receipt of the check, Feld employee Stan Casper gave Milgram title to the eleven vehicles. Casper left the Milgram office only to return a short time later. In the interim he had crossed out that portion of the legend stating "AND IN FULL SETTLEMENT OF ALL CLAIMS UNDER LEASE TO MILGRAM FOOD STORES, INC." He gave Milgram a memorandum indicating what he had done. Still visible on the face of the check were the words "IN FULL PAYMENT FOR TITLE TO words obliterated TRACTORS NUMBER C-1215 THROUGH C-1225."

On the same day, Milgram responded with a letter to Casper:

You accepted the Milgram Food Stores, Inc. check No. 774540 in exchange for the vehicle titles without any reservations. We have never agreed to anything other than as was set forth to you and any changes you may have made on that check were not authorized on behalf of Milgram Food Stores, Inc.

The disputed interest item upon which the counterclaim is based was explained by Feld District Manager Stan Casper in a letter to Milgram dated October 30, 1979:

Interest. In the calculations of any lease rate the interest has been determined for the entire length of the contract and then averaged over the contract period so that a fixed interest cost can be recovered each year. In the first year we paid more interest than we received as we do in the subsequent years until we reach the midway point at which the interest costs are reversed. Since each of these units are terminated before the end of the contract period we have calculated the interest expended, given you credit for the interest recovered for the years the contract was in force and the difference is the interest which we have prepaid and we consider a prepaid expense.

Milgram advances several alternative arguments to support entry of summary judgment in its favor on the counterclaim. First, Milgram contends Feld has no right to recover the disputed interest charges under the terms of paragraph sixteen of the master lease. Second, Milgram asserts that Feld has waived any right it may have to the disputed sums by transferring title to the vehicles and accordingly is estopped from pursuing its claim. Finally, Milgram contends that Feld's acceptance of the "full payment" check constitutes an accord and satisfaction as to eleven of the sixteen vehicles. The court has concluded that all three of Milgram's arguments are meritorious.

I.

The contract language does not encompass the disputed interest item. Under paragraph sixteen of the master lease, the lessee upon termination shall pay Feld the prorated cost of "unexpired license tags, personal property tax, Federal Highway Use Tax, and any other or similar taxes, fees, insurance and prepaid expenses ...." (emphasis added) This language appears to encompass reimbursement for expenditures Feld has made at the direction of a third party who requires payment in advance. For instance, an annual license fee is paid at the beginning of the year rather than upon the expiration of the license. On the other hand, Feld paid interest on the vehicles as it accrued. The lenders did not require the prepayment of interest by Feld. "Prepaid interest is an agreed consideration for the extension of credit, or for the use, forebearance or detention of money, which consideration is due before it actually accrues." Goldman v. First Federal Savings & Loan Association, 377 F.Supp. 883, 886 (N.D.Ill.1974), rev'd on other grounds, 518 F.2d 1247 (7th Cir.1975). It is also stipulated that "Feld paid no interest penalties to any of the financing agencies" because of the lease termination. The sole explanation for the alleged underpayment of interest by Milgram is the method by which Feld calculated the lease payments and not the actions or requirements of some third party. The compensation Feld seeks is therefore not within the terms of the contract.

As for the other two phrases Feld relies upon — "other expenses" and "asset loss" — the court finds these entirely too vague and ambiguous to encompass the interest sought to be recovered. It is well settled that "an ambiguous contract should be construed strongly against the drafting party." Walker v. Woolbright Motors, Inc., 620 S.W.2d 451, 453 (Mo.App.1981). Feld drafted the four pages of fine print which constitute the master lease. Feld elected to terminate the agreement, and if it now proves inadequate to protect the interests of the draftsman, Feld must bear sole responsibility for its predicament.

II.

Assuming arguendo that the master lease would permit Feld to recover the disputed interest item, the court finds, as an alternative rationale for the result reached here, that Feld waived such right and is estopped from asserting it. "Waiver generally is the intentional relinquishment of a known right.... It may be either express or...