Mobile Acres, Inc. v. Kurata

Decision Date07 April 1973
Docket NumberNo. 46706,46706
Citation211 Kan. 833,508 P.2d 889
PartiesMOBILE ACRES, INC., Appellant, v. Fred and Virginia KURATA, Appellees.
CourtKansas Supreme Court

Syllabus by the Court

1. The language of a contract can be said to be ambiguous where the words used to express the meaning and intention of the parties are insufficient in the sense that the contract may be understood to reach two or more possible meanings. (Following Wood v. Hatcher, 199 Kan. 238, 428 P.2d 799.)

2. A cardinal rule in the construction of written instruments is to ascertain the intention of the parties and to give effect to such intention.

3. Where the terms of a written contract are clear and unambiguous the intent of the parties expressed therein is to be determined solely from a consideration of the instrument when read in its entirety.

4. When the language in which the parties to a written agreement have expressed themselves leaves their intention doubtful or unclear, either because of the words and terms which are used or because of the manner of their arrangement, the contract is said to be ambiguous and the facts and circumstances surrounding its making and execution become competent and admissible as aids in determining what was intended.

5. Written words may have more than one meaning as applied to a contract and while parol evidence will not be permitted to change a clear, plain meaning, it may be used to eliminate a doubtful one.

6. Whether ambiguity exists in a written instrument is a matter of law to be decided by the court, and points of law which pertain to a case are to be determined judicially whether or not the litigants may be in agreement in regard thereto.

7. The parties to a contract know best what was meant by its terms, since they are the least liable to be mistaken as to what was intended, and where the contract is ambiguous as to a material point, parol evidence will be received to aid in its construction. (Following Berg v. Scully, 120 Kan. 637, 245 P. 119.)

8. In the construction of an ambiguous writing, preliminary negotiations between the parties may be considered for the purpose of shedding light on their intentions and of ascertaining the sense in which the ambiguous words or terms were used.

9. Where there is ambiguity in a written contract and extrinsic or parol evidence is required to ascertain the parties' intentions, summary judgment should not be entered in the face of contradictory or conflicting evidence.

10. When a controversy exists in good faith between the parties they should be afforded a trial at which evidence may be presented and the factual disputes determined.

11. The record is examined in a declaratory judgment action to construe a provision in a lease agreement and for reasons set forth in the opinion it is held the trial court erred in holding the lease to be clear and unambiguous and in entering summary judgment in favor of the defendants.

Edward G. Collister, Jr., of Collister, Burr & Kampschroeder, Lawrence, argued the cause and was on the brief for the appellant.

Leonard O. Thomas, of Weeks, Thomas, Lysaught, Bingham & Johnston Chartered, Kansas City, argued the cause, and John O. Somers, Kansas City, was with him on the brief for the appellees.

FONTRON, Justice:

The plaintiff, Mobile Acres, Inc., brings this action pursuant to K.S.A. 60-1701 et seq., seeking a declaratory judgment construing the provisions of a lease agreement. The controversy is over who is responsible for the payment of the ad valorem taxes during the lease period, the plaintiff lessee, or the defendant lessors. The trial court entered judgment in favor of the defendants and the plaintiff has appealed. We shall frequently refer to the plaintiff as lessee, or Mobile Acres, and to the defendants as lessors, or the Kuratas.

Sometime in 1967, Messrs. Alan Hill and Bill Webster, who are residents of Lawrence, entered into negotiations with Fred Kurata, also of Lawrence, for the lease of a ten-acre tract near the turnpike exit west of that city, as a site for a mobile home park. The negotiations culminated on August 11, 1967, in the execution of a lease for a period of ten years, with two tenyear renewal options. The stipulated rental was 7 per cent of the gross sales, as sales were defined by the lease. All parties understood that the tract would be improved for use as a mobile home court by the laying out and paving of streets, the installation of utilities, the planting of trees and shrubbery, and the construction of home sites consisting of gravel pads for the installation of the mobile homes with abutting concrete patios. A site plan marked Exhibit A was attached to the lease, depicting the work to be done.

As permitted by the terms of the lease, Messrs. Hill and Webster subsequently assigned the lease to Mobile Acres, Inc., a corporation formed and owned by them. Mobile now stands in the shoes formerly worn by Hill and Webster and will be designated herein as lessee.

Construction work was started by the lessee within the time required by the lease and was completed, so far as we can tell from the record, in 1968. It is our understanding that the park is presently in full operation, with all of the home sites happily occupied.

Trouble developed in the spring of 1969 when Mr. Kurata received a notice from the county assessor showing an assessed valuation of $6000 on the land and $7600 on the improvements. He then consulted with the attorney who had prepared the lease, who proceeded to confer with the local taxing authorities, with the end result that the taxes on the land itself without improvements were assessed to the Kuratas and the taxes on the improvements were assessed to Mobile Acres. This action sparked the present lawsuit.

It will not be necessary to quote the lease in full, which is just as well in view of its length. Paragraph 12 contains the roots of this lawsuit. It reads as follows:

'All ad valorem real estate taxes assessed against said real estate as improved pursuant to said Exhibit A, and all special assessments which may in the future become levied against said real estate, shall be paid by lessors except as herein specified. Without the prior written consent of lessors, the lessees shall not permit any other property to become affixed or attached to said real estate in such manner that the same shall subject such real estate to additional ad valorem taxes, and if they so do the lessees shall pay such additional ad valorem taxes; nor shall the lessees in any way initiate any request to any governing body for improvements which would result in special assessments against said real estate. Lessors hereby agree that lessees may request of the City of Lawrence a sanitary sewer from a point 390 feet south of the northeast corner of the above described real estate, the special assessment therefor to be paid as follows: Lessees shall pay the amount of such assessment, the lessors to reimburse lessees to the extent of $2,040.00 thereof, over a period of ten years, one-tenth each year (not to exceed $204.00 in any one year) to be deducted from rents payable to lessors hereunder. In the event the ad valorem taxes for the year 1970 and subsequent years of this lease exceed the amount of ad valorem taxes payable by lessors for the year 1969, the lessees shall pay to the lessors the difference between the amount of such subsequent annual ad valorem taxes less the amount of such taxes for the year 1969. Provided, that if during any calendar year beginning with the year 1970, the rentals paid by lessees to lessors exceed the amount of rentals so paid for the calendar year 1969, the amount for increased ad valorem taxes to be paid by lessees to lessors shall be reduced by the amount of increased rentals so paid for any such calendar year over the amount of rentals paid by lessees to lessors for the calendar year 1969. In the event lessors fail to pay any of the taxes on said real estate, lessees may pay the same and receive a credit for any taxes so paid on the rent due hereunder. (Emphasis supplied.)

The dispute is centered upon the sense or meaning of the first sentence of the paragraph (shown in italics) so far as responsibility for payment of ad valorem taxes is concerned. Mobile Acres, on the one hand, would have the language construed as requiring the lessors, the Kuratas, to pay the ad valorem taxes on both land and the improvements shown on Exhibit A, while the Kuratas, on their part, would have us interpret the provision as requiring Mobile Acres to bear the burden of the taxes on the improvements, while they, the lessors, would be obligated to pay the tax on the land, alone.

The trial court adopted the view advanced by the lessors. The court found that the lease was not ambiguous; that the improvements did not become a part of the real estate for ad valorem tax purposes but were the personal property of the lessee for tax purposes; and that under the contract the lessee, as a matter of law, was liable for payment of the taxes assessed against the improvements so long as the lease was in effect. On this basis the court entered summary judgment in favor of the defendant lessors.

Three points are raised on the lessee's appeal: (1) The lease requires as a matter of law that lessors pay the taxes on improvements made by the lessee according to the site plan attached to the lease as Exhibit A. (2) At the very least, the lessors should pay the ad valorem taxes after the first 20 years, provided both ten-year options are exercised. (The lease provides the improvements become the property of lessors at the conclusion of the second ten-year option.) (3) The court erroneously determined there were no genuine issues of fact requiring the presentation of evidence as to the parties' intentions. This ground is urged in the event this court finds the lease to be ambiguous as to the payment of taxes.

On appeal, both sides vigorously assert that the contract is not ambiguous. Howeve...

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