Mo. Athletic Assn. v. Delk Inv. Corporation

• Decision Date: 13 September 1929
• Docket Number: No. 27148.,27148.
• Citation: 20 S.W.2d 51
• Parties: MISSOURI ATHLETIC ASSOCIATION v. DELK INVESTMENT CORPORATION, Appellant.
• Court: Missouri Supreme Court

20 S.W.2d 51

MISSOURI ATHLETIC ASSOCIATION v. DELK INVESTMENT CORPORATION, Appellant.

No. 27148.

Supreme Court of Missouri. Division One.

September 13, 1929.

Appeal from Circuit Court of City of St. Louis. — Hon. Victor H. Falkenhainer, Judge.

AFFIRMED.

Fordgee, Holliday & White and R.D. Fitz Gibbon for appellant.

(1) The lease involved in the case at bar should be interpreted in the light of the following general rules for construing written instruments: (a) The primary concern of the court in interpreting a lease or other written instrument is to ascertain the intent of the parties thereto. Johnson v. Dalrymple, 140 Mo. App. 241; Johnson Co. v. Wood, 84 Mo. 489; Henry v. Excelsior Springs Co., 277 Mo. 508; Ritchie et ux. v. State Bd. of Agriculture, 266 S.W. 492. (b) Words used in a written instrument are to be interpreted according to their usual and ordinary meaning. Johnson v. Dalrymple, 140 Mo. App. 232; Maginn v. Lancaster, 100 Mo. App. 116; Codman v. Piano Co., 229 Mass. 285. (c) The intention of the parties must be gathered from the whole instrument rather than from a single clause thereof. Sachleben v. Wolff, 61 Mo. App. 34; Ritchie et ux. v. State Bd. of Agriculture, 266 S.W. 492; Union Depot Co. v. Railroad, 113 Mo. 213. (d) The parties to a lease can, by appropriate words, bind themselves to consequences which may be harsh and contrary to the method by which men ordinarily bind themselves. Conservative Realty Co. v. Brewing Assn., 113 Mo. App. 261; Girard Trust Co. v. Motor Co., 291 Pa. 507; Wapsie P. & L. Co. v. City, 193 N.W. 643, 197 Iowa, 996; Bankers Reserve Life Co. v. Rice, 226 Pac. 324, 99 Okla. 184; Bice v. Siver, 152 N.W. 498. (e) The rule that instruments which are ambiguous will be construed against one party or the other is not favored. Johnson Co. v. Wood, 84 Mo. 489; 2 Thompson on Real Property, 269, sec. 1204; Marble v. Mining Co. (Minn.), 215 N.W. 72. (f) Courts cannot, under the guise of interpretation, make new contracts for the parties. Johnson v. Dalrymple, 140 Mo. App. 232. (2) The lease itself plainly shows that the parties intended the respondent to bear the burden of these taxes. (a) The definition of the word "net" plainly shows that the parties intended the respondent to bear the burden of these taxes. St. John v. Railroad Co., 22 Wall. 136, 22 L. Ed. 746; State ex rel. v. Gas Light Co., 102 Mo. 472; Bennett v. Womack, 3 C. & P. 96; Sandbrook et ux. v. Inv. Co., 239 S.W. 547; Melvin v. Hoffman, 235 S.W. 107. (b) The definition of the phrase "on account of" shows that the parties intended the respondent to bear the burden of these taxes. McKeen v. Brooks, 178 Pac. 746, 55 Mont. 483; Burns v. Board of Deuel County Commrs., 164 N.W. 1029, 39 S.D. 426. (3) Analogous cases plainly show that the parties intended the respondent to bear the burden of these taxes. (a) Income tax cases: North Penn. Railroad Co. v. Railroad Co., 249 Pa. 326; Suter v. Jordan Marsh Co., 225 Mass. 34; Erlich v. Brogan, 262 Pa. 362; Kimball v. Cotting, 229 Mass. 541; Philadelphia G. & N. Railroad Co. v. Ry. Co., 265 Pa. 325; Philadelphia City Passenger Ry. Co. v. Rapid Transit Co., 263 Pa. 561; Republic Building Co. v. Gaertner, 256 S.W. 1111, 30 A.L.R. 984; Farmers Loan & Trust Co. v. Park & Tilford, 215 N.Y. Supp. 244; Pittsfield & N.A. Railroad Corp. v. Railroad Co., 157 N.E. 611; Chicago v. Ry. Co., 245 Ill. App. 473; Whitlock v. Railroad Co., 29 Fed. (2d) 351. (b) Franchise tax cases: Thomas v. Ry. Co., 93 Fed. 592; Aetna Ins. Co. v. Railroad Co. 156 Fed. 132, affirmed 170 Fed. 1019, 215 U.S. 601, 54 L. Ed. 344; Pennsylvania Steel Co. v. Ry. Co., 198 Fed. 721; Cayuga & S. Railroad Co. v. Railroad Co., 213 N.Y. Supp. 586, 215 App. Div. 429. (c) Capital stock tax cases: Cases supra; Chicago v. Rys. Co., 245 Ill. App. 473.

Glendy B. Arnold for respondent.

The lease in question does not obligate respondent lessee to pay income taxes levied against appellant nor the capital stock or franchise taxes paid by appellant, since none of these taxes are legal charges against the realty or taxes upon the rent due from and paid by respondent under the lease. Laclede Gas Light Co. v. Trust Co., 12 S.W. (2d) 432; Elliott v. Winn, 305 Mo. 103; Reisenberg v. Realty Co., 215 Mo. App. 43.

LINDSAY, C.

This is a suit wherein the plaintiff, Missouri Athletic Association, respondent here, sought and was granted an injunction against defendant, Delk Investment Corporation, restraining the defendant from taking steps to forfeit a lease upon certain property in the city of St. Louis. The cause was submitted upon the pleadings and an agreed statement of facts. Its determination depends entirely upon the conditions of the lease in question. The facts alleged and considered may be briefly stated, and in doing so, we follow in part the statement found in appellant's brief.

On October 15, 1914, the Boatman's Bank, by its indenture of lease, demised and let certain real estate situated in the city of St. Louis, to the Missouri Athletic Association, from said date until July 1, 1915, and for a period of ninety-nine years thereafter. Both the Boatmen's Bank and the plaintiff are and then were Missouri corporations. On October 18, 1922, the Delk Investment Corporation, also a Missouri corporation, for a consideration of $300,000, purchased all of the right, title and interest of the Boatmen's Bank in and to the said real estate, and in and to the said indenture of lease. Thereafter, the defendant Delk Investment Company notified the plaintiff that it had acquired said title and said lease, and the plaintiff attorned. During the year 1923, the plaintiff paid to defendant in rent under the lease the amount of $16,500, and the defendant for the year 1923 accounted for said rental in its return for federal income tax, and was assessed and taxed upon its net income twelve and one-half per cent under the Federal Income Tax Law of 1921, and paid a tax of twelve and one-half per cent on its net income, and paid state income taxes of one per cent on its income for the year 1923. It is agreed that after defendant purchased the land and lease from the Boatmen's Bank for $300,000, defendant set up said property on its books at that value, and as a result thereof for the year 1924 was obliged to pay and did pay to the Federal Government a capital stock tax of $300, and also that, as a result thereof, for the year 1923, defendant was obliged to pay and did pay to the State of Missouri a corporation franchise tax of $150, and further that, for the year 1924, the defendant was obliged to pay and did pay to the State of Missouri a corporation franchise tax of $150. On March 28, 1924, defendant demanded of plaintiff that plaintiff repay to defendant $2,827.50, the sum of all of said alleged taxes, on the ground that they were due and payable to defendant, by the plaintiff, under the terms of said lease, and plaintiff refused to comply with said demand. Said sum of $2,827.50 includes $2,062.50 as being twelve and one-half per cent of $16,500, and includes $165 as one per cent of $16,500 for state income tax for the year 1923, and similarly for the year 1924. On account of such refusal, the defendant threatened that if plaintiff did not repay said taxes by June 2, 1924, it would, in accordance with the terms of the lease, take steps to declare the lease forfeited. On May 31, 1924, the plaintiff brought suit against defendant, asking for a temporary injunction, and upon a full hearing, a permanent injunction, restraining the defendant from taking steps to forfeit the lease. As a final result of the hearing a permanent injunction was awarded the plaintiff, and from that judgment defendant prosecutes this appeal. The sole matter of controversy is the effect to be given to certain provisions in the lease in question. The provisions necessary to be considered are as follows:

"The rent herein to be paid is net to the Lessor and the Lessee further covenants and agrees that it shall and will in addition to the rent to be paid by it as aforesaid, pay and discharge promptly when the same become due and payable, all taxes, rates, impositions, levies and assessments of every kind and description that may be levied or imposed or required to be paid on account of said demised premises, or any portion thereof, or the rental thereon, under either the State, City or Federal laws, or under or by any lawful authority whatsoever during the entire term of this lease, including all general and special taxes and including general taxes payable September 1, 1915, and delinquent January 1, 1916, and the proportionate part of the general taxes for the year 1914, and the sprinkling tax, and also special taxes that may be required to be paid on said property, whether for public work done or commenced during the term of this lease, including bills or judgments for benefits arising in any proceeding against the property or the owners thereof on account thereof for any public purposes whatsoever, and the Lessee upon request shall from time to time produce and exhibit to the Lessor, before the same become delinquent, receipts for all taxes, rates, impositions, levies and assessments required to be paid by the Lessee hereunder.

"It is intended hereby that all charges of whatsoever kind and nature imposed against said property or the income thereof shall be paid by the Lessee, so that the said rental of sixteen thousand five hundred dollars ($16,500) per annum shall be net to the Lessor."

The question of whether a lessee by the terms of his lease was bound to pay a part of the federal income tax of the lessor or reimburse the lessor for federal income tax paid by the lessor, because the rental of the leased premises entered into the taxable Income income of the lessor, has been before this court in two Tax. cases. [Elliott v. Winn, 305 Mo. 105, and Laclede Gas Light Co. v. St. Louis Union Trust Co., 321 Mo. 782, 12 S.W. (2d) 432.] The question was also before the ...