Nelson v. Darling Shop of Birmingham, Inc.

• Decision Date: 28 February 1963
• Docket Number: 6 Div. 730
• Citation: 157 So.2d 23,275 Ala. 598
• Parties: Frank NELSON, Jr., et al. v. DARLING SHOP OF BIRMINGHAM, INC., et al.
• Court: Alabama Supreme Court

Page 23

157 So.2d 23

275 Ala. 598

Frank NELSON, Jr., et al. v. DARLING SHOP OF BIRMINGHAM, INC., et al.

6 Div. 730.

Supreme Court of Alabama.

Feb. 28, 1963.

Rehearing Denied July 3, 1963.

Further Rehearing Denied Oct. 31, 1963.

White, Bradley, Arant, All & Rose, Earl M. McBee, John S. Tucker and Lee C. Bradley, Jr., Birmingham, for appellants.

Cabaniss & Johnston, K. E. Cooper and Drayton T. Scott, Birmingham, for appellees.

HARWOOD, Justice.

This is the fourth time this court has had before it proceedings arising out of disputes as to a lease entered into between the Nelson interests, as landlords, and the Darling shop, as lessee.

During the course of this protracted litigation, there have been changes in the party litigants brought about by death, dissolution of corporations with conveyances to successor corporations, etc. Essentially, however, the litigants have been the Nelson Realty Company, or its successors, or assigns, and the Darling Shop of Birmingham, or its successor. For convenience we will hereafter designate the parties as Nelson, or as Darling.

On 10 March 1943, a lease was executed between Nelson and Darling whereby certain premises located at 1828-30 Third Avenue North, and 300 North 19th Street, in the City of Birmingham, were leased by Nelson to Darling.

In 1948, the present appellee (Darling) filed a bill for a declaratory judgment seeking a construction of certain aspects of the lease. The respondent (Nelson) filed a cross bill by which it was sought to have the lessee's right of renewal declared forfeited because of breach of certain covenants in the lease. The lower court overruled demurrers to the cross bill. On appeal the judgment of the lower court overruling the demurrer to the cross bill was reversed, this court writing:

'* * * The present case must be narrowed to a consideration of the question as to whether or not dependence of the covenants with reference to renewal on the various other covenants in the lease can be implied.

'The burden is of course on the pleader to show that under the provisions of the lease dependence of covenants will be implied. The cross bill in the present case does not present such a situation. It is true that in the case at bar the right of renewal is given 'upon the same terms and conditions,' which means that provisions for the payment of rent and the furnishing of reports would be for the additional term as had been required for the original term. But this does not imply that the right of renewal is conditioned on payment of rent or furnishing of reports as required in the original lease but simply that the provisions of the lease itself would be the same.'

This decision will hereinafter be referred to as the first appeal, and may be found in 255 Ala. 586, 52 So.2d 211 (March 15, 1951).

After remandment the cross bill was amended several times, and by an amendment to the cross bill filed on 9 January 1952, Nelson asserted fraud in the procurement of the lease, in that Darling at the time of the execution of the lease had made certain oral agreements as to renovations and merchandising of the premises as an inducement to secure the lease, having no intention at the time of carrying out such oral agreements. Previously Nelson had sought a declaration that Darling had forfeited its right to a renewal of the lease under its terms on account of such fraud.

The lower court overruled a demurrer to the cross bill as a whole, and to certain aspects of it, and sustained the demurrer as to that aspect seeking to have it declared that the lessee failed to renew the lease because of the non-tender to the lessee of $40,000.00. On appeal the order of the lower court was affirmed in part, reversed in part, and remanded to the lower court, the court stating:

'The result is that the demurrer should be sustained to that aspect of the cross bill which seeks to cancel the lease for fraud in its inducement without alleging that Prudential has consented thereto. The demurrer should be sustained to that aspect of the cross bill which seeks a declaration that Darling failed to renew the lease for that there was a failure to tender to Nelson $12,000 as an advance. But it was properly sustained to that aspect which sought a declaration that there was a failure to renew because Darling did not tender to Nelson a loan of $40,000.'

This decision will hereinafter be referred to as the second appeal, and is to be found in Nelson Realty Co., Inc., v. Darling Shop of Birmingham, Inc., 262 Ala. 495, 79 So.2d 793.

In the third proceeding in the lower court, that court sustained a demurrer to Nelson's substituted cross bill, and an appeal was taken from that ruling. This court held that the substituted cross bill stated sufficient facts to give it equity to the end that the parties might proceed to trial on the interrelated questions of fraud in the procurement of the contract, the question of an accounting, and in the alternative, specific enforcement of certain terms of the lease. See, Nelson Realty Co., Inc., et al. v. Darling Shop of Birmingham, Inc., 267 Ala. 301, 101 So.2d 78.

Since we consider the question of accounting peripheral to the question of fraud in the procurement of the lease contract, we will consider the question of the alleged fraud first.

The evidence presented below tends to show that the Nelson interests had been the owners of the leased premises for some time prior to 10 January 1941. On that date the Prudential Insurance Company procured title thereto by foreclosure of the equity of redemption the premises held by the Insurance Company. Thus the right of redemption by Nelson would have expired on 10 January 1943. This date fell on a Sunday, so that 11 January 1943 was treated by the parties as the expiration date of the right of redemption.

In late December 1942, or early January 1943, Mr. Nelson was informed that Prudential would permit a redemption of the premises in question for $340,000.00, of which $30,000.00 was to be paid in cash, and a first mortgage given to secure the balance of $310,000.00. Negotiations were first instituted on this basis, the Reconstruction Finance Corporation being first contacted.

Mr. Nelson was in military service and stationed at Harrisburg, Pennsylvania. In late 1942, he and Mrs. Nelson met with representatives of Darling and the possibility of Darling assisting in the redemption of the property and renting the premises was discussed.

In an effort to raise money to effect the redemption Mr. and Mrs. Nelson went to New York on 6 January 1943 and remained there until a lease agreement was executed with Darling on 11 January 1943.

On 8 January 1943, Mr. Nelson was informed that the redemption price would be $352,000 rather than $340,000 as originally stated by Prudential.

On 7 January 1943, Darling made proposals for the lease of the premises which the Nelsons considered unacceptable, and on that day they entered into negotiations with the Ann Lewis Shops relative to renting the premises to them. Terms more favorable to Nelson were proposed by the Ann Lewis Shops.

Further negotiations were, however, continued with representatives of Darling. The Ann Lewis Shops withdrew from the negotiations which were continued solely with Darling. On 8 January 1943, agreement was reached concerning significant parts of the rental arrangement, and Mr. Gluck, representing Darling, and Mr. Nelson shook hands.

The next day 9 January 1943, Mr. and Mrs. Nelson went to the office of Stanley M. Dorman who undertook to prepare the lease as attorney for Darling.

The Nelsons, during the negotiations, had employed as their attorney Mr. Emory C. Risley, whose qualifications as a lawyer were conceded. Mr. Nelson told Mr. Risley what the terms of the leases agreement were in general.

Mr. Risley was present at two conferences and aided in the preparation of the agreement to lease of 9 January 1943, and this agreement was held in escrow by Mr. Risley pending the happening of certain events specified therein.

When the actual lease was prepared in draft form by Darling, Mr. Risley reviewed it, and on 26 January 1943, wrote a four page letter to Mr. Dorman, Darling's attorney, setting out changes he wished to make. All of these changes were accepted by Darling except those relating to paragraph 30 of the lease. This paragraph was further considered.

On 1 February 1943, Mr. Risley wrote another letter to the then attorney for Darling in which he stated that 'Captain Nelson is willing to agree in principle to your contention with respect to paragraph thirty of the proposed lease provided the following conditions are met.' These conditions pertained to the revision of paragraph 25 of the lease, and to certain provisions to be set forth in paragraph 30. Mr. Risley enclosed proposed drafts of these two paragraphs.

Paragraph 25 of the lease is in the exact language as that suggested by Mr. Risley, and is as follows:

'In the event that the Tenant alters or improves the demised premises for the purposes of its business, the Landlord shall contribute to the cost of such alteration and improvement, in the manner provided in paragraph Twenty-six hereof, a sum equal to fifty per cent (50%) of the cost of such alteration and improvement but not to exceed a sum equal to fifty per cent (50%) of the overages yielded during the term of this Lease, or any renewal thereof, provided however, that the Landlord shall be under no obligation to contribut any part of the cost of altering or improving the second floor of the demised premises unless the alteration or improvement thereof shall be done for the purpose of adapting said second floor to use by a business or businesses consisting of the sale of goods, wares, products, merchandise or services, connected or associated with a business conducted on the first floor, the gross sales of which business or businesses conducted or to be conducted on said floor shall be included in 'gross sales' under...