RREEF Mid-America Fund III v. Distronics Corp.
| Decision Date | 11 February 1987 |
| Docket Number | No. 85-2008 C (5).,85-2008 C (5). |
| Parties | RREEF MID-AMERICA FUND III, Plaintiff, v. DISTRONICS CORPORATION, Defendant. |
| Court | U.S. District Court — Eastern District of Missouri |
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Kramer & Frank, Timothy M. Bosslet, St. Louis, Mo., Hirsch and Rauscher, David J. Rauscher, Clayton, Mo., for plaintiff.
Ziercher, Hocker, Human, Michenfelder & Jones, John G. Young, Jr., St. Louis, Mo., for defendant.
Plaintiff RREEF Mid-America Fund III contends in Count I of the amended complaint that defendant Distronics Corporation breached various provisions of a lease agreement between the parties dated May 29, 1984. RREEF seeks damages for injuries to its realty, unpaid rent, taxes, common area maintenance charges, and attorneys' fees. In Count II, plaintiff alleges that defendant's actions constituted waste of the property under Missouri common and statutory law.
Defendant Distronics concedes that it owes RREEF one month's rent and its share of certain property taxes. However, defendant claims that RREEF has not adequately documented its claim for common area maintenance charges. In addition, defendant contends that its employees did not damage RREEF's property to the extent claimed by plaintiff. While conceding that its agents removed some property from the premises, Distronics asserts that these items were its personal property and not part of the real estate. Defendant agrees that it must reimburse plaintiff for the relatively insignificant damage to the premises caused by the removal, but strongly disputes plaintiff's assertion that it caused any other damage to the property. Finally, Distronics contends that it made a security deposit when it signed the lease, a contention plaintiff denies.
The parties have submitted proposed findings of fact and conclusions of law, and have focused their briefing on four dispositive issues. This Memorandum constitutes the Court's findings of fact and conclusions of law for purposes of Fed.R.Civ.P. 52(a).
Plaintiff RREEF is a California Group Trust and its trustees are citizens of Illinois and California. RREEF invests in real estate across the country and owns a commercial building at 149 Weldon Parkway in Maryland Heights, Missouri, a St. Louis suburb. Defendant Distronics, an Ohio corporation with its principal place of business in New Jersey, leased suites 113 and 115 of the Weldon Parkway property from plaintiff in accordance with a lease agreement dated May 29, 1984. The term of this lease ran from April 1, 1984 to March 31, 1985. Defendant conducted a computer services business from the premises until its lease with RREEF expired.
Defendant originally leased the space at 149 Weldon Parkway on February 22, 1983 from O'Fallon Gas Service Leasing Company. On November 22, 1977, Distronics and W & S Investment Co., as agent for the owner, renewed this lease for a five-year term commencing on April 1, 1978 and ending on March 31, 1983. They amended this agreement on August 1, 1980, adding 1,725 square feet of adjoining space and extending the renewal to March 31, 1983. Distronics agreed on February 21, 1983 to renew the 1973 lease for an additional one-year term beginning on April 1, 1983 and ending March 31, 1984.
During this final one-year renewal period, plaintiff RREEF purchased the property and received a general warranty deed dated October 31, 1983. As part of this transaction, RREEF received an estoppel letter from defendant which essentially sets forth the status of Distronic's arrangement with the previous owner. In particular, the letter states, in part:
bracketed comment added.
The original 1973 lease between defendant and O'Fallon Gas Service Leasing Company contains a codicil which Distronics contends preserved its rights in certain property it used in its business at 149 Weldon Parkway. This provision reads:
Special Equipment. Lessee is hereby granted permission to install special equipment to the demised premises, all as set out in Exhibit D. Said special equipment shall belong to and remain the personal property of Lessee and Lessee may remove same upon termination and expiration of this lease. Upon removal of said special equipment, Lessee convenants and agrees to restore said demised premises in as good a condition as though said special equipment had never been installed. Said restoration shall be at the expense of Lessee and upon the failure of Lessee to restore said demised premises, Lessor may undertake to do so and Lessee shall be liable to Lessor for the costs of said restoration.
The "Exhibit D" referenced in this quoted provision in the 1973 lease provides:
Defendant Distronics asserts that, by virtue of the explicit provisions of the 1973 lease, it retained ownership of an air-conditioning unit (the "Special H.V.A.C. unit"), the "Special raised floor" in the computer room, and the "Special electrical receptacles." Plaintiff contends that these items became part of the real estate when installed and, consequently, defendant had no right to remove them from the premises when it vacated. RREEF argues that the lease agreement it executed with Distronics on May 29, 1984 governs the rights of the parties in this action. This 1984 lease contains a standard integration clause which, plaintiff contends, precludes defendant from relying on provisions in the original 1973 lease.
In Count I, RREEF claims that Distronics breached a number of provisions in the 1984 lease. For example, Distronics promised to pay rent and to reimburse plaintiff for certain common area expenses and taxes it incurred in managing the building. Defendant admits it owes rent for March 1985 and prorated property taxes for the first three months of that year. However, Distronics, while conceding it might be liable to plaintiff for common area charges for 1984 and 1985, contends that RREEF has not provided adequate documentation for the amount it seeks to recoup.
RREEF asserts that defendant breached its duty under paragraph 28 of the lease to surrender the premises in the same condition as received, less reasonable wear and tear. The lease also includes language in paragraph 8(F) which sets forth the parties' understanding concerning responsibility for repairs to the premises. This provision reads:
Tenant shall upon demand by Landlord, pay, as additional rent, the costs and expense of repairing any damage to the Premises resulting from and/or caused in whole or in party by the negligence or misconduct of Tenant, its agents, servants, employees, patrons, customers, or any other person entering upon the property as a result of Tenant's business activities or caused by Tenant's default hereunder to the extent the cost of repairing such damage is not reimbursed by the insurance to be maintained by Landlord under Paragraph 24(A).
RREEF cites this paragraph as one of the bases for its claim against defendant for damage to the leased property. But, Distronics argues that this provision requires RREEF to look first to its insurers before making a claim against defendant for the injuries to the building. RREEF disagrees with this construction of the lease provision and notes that another provision in the lease specifically states that any insurance it purchased was for its sole benefit. In addition, plaintiff presented oral testimony that its insurance policies did not provide for coverage of this type of loss.
Distronics also had an affirmative duty under the lease to arrange a joint inspection of the premises at least ninety days before the lease expired. Plaintiff contends that defendant's failure to comply with this requirement was a cause of the damage to the property. Finally, the parties agreed that Missouri law would govern the lease in all respects and that RREEF could recover attorneys' fees incurred in enforcing its rights under the agreement.
Distronics decided in the fall of 1984 to wind-down its business operations in the St. Louis area. The company arranged for John Fisher and James O'Brien, two of its employees at the 149 Weldon Parkway office, to close the business and liquidate its assets. These men sold Distronics' office equipment, computers, phone system, and furniture, actions which plaintiff does not challenge in this suit. They also sold the H.V.A.C. unit and the raised flooring. Apparently, the men also removed and sold the special electric receptacles Distronics originally installed. Plaintiff contends that the air conditioning unit, flooring and receptacles were part of the realty and, therefore, Distronics had no right to remove them. Defendant disagrees, but concedes that the removal of the air-conditioning unit and the special flooring caused some minor damage to the premises.
O'Brien ceased working for Distronics on March 22, 1985. He knows nothing about what occurred at the leased premises after that date. He concedes, though, that when he left the premises on March 22, they were "pretty messed-up" and in a "rank" condition. After O'Brien's departure, Fisher continued to work at the Distronics office for the next week and...
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