Shadeland Development Corp. v. Meek, 4-1084A289

• Decision Date: 10 March 1986
• Docket Number: No. 4-1084A289,4-1084A289
• Citation: 489 N.E.2d 1192
• Parties: SHADELAND DEVELOPMENT CORP. and Holiday Inns, Inc., Appellants (Defendants Below), v. Mary R. MEEK and J. Perry Meek Realty Co., Inc., Appellees (Plaintiffs Below).
• Court: Indiana Appellate Court

Page 1192

489 N.E.2d 1192

SHADELAND DEVELOPMENT CORP. and Holiday Inns, Inc. Appellants (Defendants Below), v. Mary R. MEEK and J. Perry Meek Realty Co., Inc., Appellees (Plaintiffs Below).

No. 4-1084A289.

Court of Appeals of Indiana Fourth District.

March 10, 1986.

Michael R. Fruehwald, Barnes & Thornburg, Indianapolis, for appellants.

John F. Wickes, Jr. Patricia Polis McCrory, Scopelitis & Garvin, Indianapolis, for appellees.

MILLER, Judge.

Plaintiffs-appellees Mary R. Meek and J. Perry Meek Realty Co., Inc. (the Meeks) brought suit against defendants-appellants Shadeland Development Corp. and Holiday Inns, Inc., claiming damages arising from an alleged breach of a 60 year lease of commercial/motel property in Indianapolis, Indiana. The Meeks were owner-lessors of the property. Shadeland was a tenant under the lease but transferred its interest in the lease to another company, San Antonio Inns, Inc., which subsequently defaulted in rent payments. The Meeks alleged that the assignment of the lease by Shadeland was a breach of the lease, was ineffective to release Shadeland from liability, and was tortious (assignment of a lease to an insolvent assignee). Holiday Inns, owner of the stock of Shadeland, was alleged to be liable for the debts of its subsidiary.

Both sides moved for summary judgment. The trial court denied the motion of Shadeland and Holiday Inns, and granted the Meeks' motion as to liability, certifying the liability determination as a final judgment under Ind. Rules of Procedure, Trial Rule 56(C). Shadeland and Holiday Inns now appeal the denial of their summary judgment and the granting of the Meeks' motion. We address the following issues:

1. Does the lease give Shadeland the right to assign?

2. Was the lease effectively assigned to San Antonio so as to release Shadeland from liability?

3. Did Shadeland have a duty to exercise reasonable care in the assignment of the lease?

4. Is Holiday Inns liable as the parent corporation of Shadeland?

We reverse. We find the clear and unambiguous language of the lease permitted Shadeland to assign, the assignment to San Antonio was full, complete and unconditional, and the lease did not obligate Shadeland to guaranty a solvent assignee.

FACTS

This action arises from a lease, dated June 15, 1960 between the Meeks as lessors and "Fred C. Tucker, Jr. Agent and upon assignment his nominee," as lessee. Tucker was an agent for an Indiana corporation to be formed by Tucker and others. As named lessee he was to assign his interest to the corporation which was to assume the lease and all obligations thereunder.

Tucker assigned his interest in the lease to 1920 North Meridian Corporation on September 6, 1960. Sometime in the early 1960's, a motel building was constructed as required by the lease and a motel operation was commenced.

Shadeland was incorporated as an Indiana corporation on March 8, 1962. 1920 North Meridian subsequently merged with Shadeland on March 30, 1970, with Shadeland emerging as the surviving corporation. On December 18, 1970, Holiday Inns acquired all the shares of Shadeland in exchange for Holiday Inns' stock.

On July 22, 1977 Shadeland assigned the lease to Key Host Inn of Indianapolis, Inc., Robert Weber, President, for $100,000.00 plus the assumption of the company's leases. Holiday Inns loaned Key Host the funds to pay for the transfer of the property from Shadeland to Key Host.

Some financial difficulties arose and Key Host was in default approximately one month later on October 13, 1977. A "resettlement statement" was worked out between Shadeland and Weber whereby Shadeland, as assignor, entered into an assignment of the lease with San Antonio Inns, Inc. as assignee. Weber signed as guarantor for San Antonio. At the time of assignment Holiday Inns loaned money to San Antonio to assist in financing the consideration paid by San Antonio to Shadeland. The debt of San Antonio to Holiday Inns was paid within a year, and on September 6, 1978 the assignment was recorded in the office of the Marion County Recorder. Thereafter, San Antonio paid rent directly to the Meeks.

After October 13, 1977, San Antonio operated a motel on the leased premises. San Antonio vacated the premises in July, 1980 and no rent was paid to the Meeks after September 1980. The Meeks brought suit for damages based upon approximately $14,000 in back rent, the rent due on the remaining term of nearly 40 years, real estate taxes and attorney fees.

DECISION

It is a general rule that the intention of the parties to a contract is to be determined from the "four corners" of the document. Shrum v. Dalton (1982), Ind.App., 442 N.E.2d 366. Absent any ambiguity, the court will not construe the contract. Reeder v. Ramsey (1984), Ind.App., 458 N.E.2d 682. Rather, where the terms of the contract are plain and clear on the face of the document, such terms are conclusive as to the meaning of the contract and the court will apply the contract's provisions according to the plain language of the document. Young v. Van Zandt (1983), Ind.App., 449 N.E.2d 300, 307. Thus, we focus on the language found in the lease contract between Shadeland and the Meeks.

I. Shadeland's right to assign the lease

Shadeland urged in summary judgment proceedings that the lease expressly extended a free right of assignment to 1920 North Meridian Corporation, the nominee corporation referred to in the lease. In opposing Shadeland's motion for summary judgment the Meeks argued the right of assignment in the lease was limited to the right of Fred C. Tucker, Jr. to assign to the nominee corporation and no other assignment without consent was allowed. The trial court agreed with the Meeks' position and made specific findings to the effect:

"30. The unfettered right to assignment of the Lease only extended to Fred C. Tucker, Jr., Agent, and the initial assignment to his nominee corporation, i.e. 1920 North Meridian Corporation, and not in subsequent or successor lessees. (Mary R. Meek Affidavit; and John P. Meek Affidavit).

31. It was the understanding and intention of the parties at the time this Lease was executed that the free right of assignment to this Lease existed only in Fred C. Tucker, Jr., Agent, and pertained only to the assignment of his interest in the Lease to his nominee corporation, 1920 North Meridian Corporation. (Mary R. Meek and John P. Meek Affidavits).

32. It was the understanding and intention of the parties at the time this Lease was executed that this initial assignment was to be between persons with an interest and residency in Indianapolis, Indiana, and that subsequent assignments would have to be approved by the Lessors in order to be effective. Further, it was the understanding of the Lessors that subsequent assignments would not be effective unless there was a novation on their part or new and additional consideration tendered to them for such assignment.

(Mary R. Meek and John P. Meek Affidavits)."

The court also made the following conclusion:

"27. The approval of Plaintiffs, Lessors, to any assignment subsequent to the initial assignment with Fred C. Tucker, Jr., Agent, to his nominee corporation was required."

On appeal, the Meeks now concede that the position urged by them below and adopted by the trial court was erroneous:

"[T]he Meeks do not dispute Appellants' interpretation of the plain meaning of the Lease. That is, Article XIII of the Lease provided that the term "Lessee" was to mean Tucker or his nominee corporation, 1920 North Meridian, and the Lessee (Tucker or 1920 North Meridian) was given a free right of assignment, coupled with a novation, following the completion of certain improvements upon the leased premises. The plain and unambiguous language of Article XIII clearly discloses that the right to freely assign extended to 1920 North Meridian."

Appellees' Brief at 12-13 (emphasis added). The Meeks have hitched their wagon to a new horse and now argue that although the nominee corporation, 1920 North Meridian Corporation, did have a right to assign, its successor by merger, Shadeland, did not.

We agree that the trial court erred in concluding the free right to assign extended only to Fred C. Tucker. Article XIII of the lease contract addresses assignment and subletting. This section reads as follows:

"ARTICLE XIII

Assignment and Sub-letting

Section 1. Assignment. It is understood and agreed that Fred C. Tucker, Jr., the named Lessee herein, intends to assign this Lease to a nominee, being an Indiana corporation to be formed by Fred C. Tucker, Jr. and others, which corporation will assume this Lease and all obligations thereunder. It is understood and agreed that this Lease may be freely assigned to such Indiana corporation by Fred C. Tucker, Jr. at any time and, upon assumption of this Lease by such corporation, it shall be the Lessee hereunder as if it were the original party and solely liable and Fred C. Tucker, Jr. shall have no further liability hereunder, either as agent or individually. The term 'Lessee' as used in this Lease throughout shall mean Fred C. Tucker, Jr. or such nominee corporation after assignment.

Prior to the completion of construction of improvements on the Leased Premises required of Lessee pursuant to Article III hereof, Lessee (the nominee corporation) shall have no right to assign this Lease or any portion thereof without the written consent of Lessor first having been obtained.

After completion of the improvements on the Leased Premises called for by Article III hereof, Lessee shall have the free right to assign this Lease without the consent of Lessor; and, upon such assignment becoming effective and the assumption by the assignee of all obligations of this Lease, Lessee shall have no further liability hereunder.

Section 2. Sub-letting. Lessee shall have the right to sub-let the Leased Premises in whole or in part at any time without the consent of the Lessor.

Section 3. Obligations of Assigns. The...